Why it pays to plan your travel money
With the pound likely to slide against foreign currencies until well into the autumn, families who fail to plan holiday spending abroad could be £100 or more out of pocket.According to Sainsbury's Travel Money, it cost Britons a massive £391 million in fees in the past year to withdraw £14.2 billion from overseas ATMs on debit and credit cards.
Prepaid money cards, says Sainsbury's, can be a trap too: nearly two-thirds (65.3%) of them levy individual transaction fees when customers access money abroad, and 6.1% of prepaid cards charge customers for balance checks too.
At the International Currency Exchange, product manager Janet Johnson says: "Prepaid cards offer huge benefits, chief of which is the fact you don't get stung on credit and debit card transactions and their rate of exchange is competitive.
"But one barrier is the sheer choice of prepaid cards on offer. Benefits vary so check the exchange rate offered, see if there is a monthly or purchase fee, look at charges for transactions or ATM use, and see if you can load enough on the card to meet everyday spending needs."
In theory, travellers should be having a field day on their holiday money as competition is fierce between credit and debit card providers, specialist currency firms are going online to slash costs, and there's an avalanche of prepaid cards.
There are new entrants in the market too: Metro Bank, with eight branches in the London area, has euros and dollars available in stores at attractive rates for instant collection, with other currencies available the next day.
The my Travel Cash card promises no ATM withdrawal fees, plus 1% unlimited cashback on all purchases. It claims a £100 withdrawal in euros could save up to £4.75 against a standard debit or credit card.
The choice is overwhelming, but the current issue of Which? Travel magazine claims that 39% of its sample survey used the Post Office to exchange money in the past year.
Only 1% used the Caxton FX prepaid card, but this, says Which? Travel, got the highest customer satisfaction score (89%).
Caxton FX, in its own survey, reckons British travellers could waste £1 billion on hidden charges this summer - on bank charges, ATM withdrawals and paying for food and activities with debit or credit cards while abroad.
It also fears more than 13 million Britons could be hit by hidden dynamic currency conversion (DCC) charges - adding another £20 in hidden costs to the average £500 spent on a two-week holiday.
Retailers typically charge around 4% for this fee and catch out consumers paying for items in supermarkets and restaurants or withdrawing cash from ATMs abroad.
Caxton FX managing director James Hickman says: "Too many people are caught out when they spend abroad. Most ATMs give the option to use local currency or pay in pounds.
"You are also at risk when eating out. When the bill arrives, you may be offered the facility to pay in pounds rather than local currency.
"The 4% fee goes straight to the retailer, so it's in his interest to dupe unsuspecting customers. You can't have second thoughts when you get back, as it is a perfectly legal charge.
"It is ridiculous so many consumers lose out, when they need to cut costs at the moment. Simple things such as requesting transactions to appear on your statement in the local currency rather than pounds sterling save money, especially in the long run - and this all adds up."
Hickman also points out that holidaymakers are hit by additional ATM fees when they withdraw money abroad - on average charges of £1.50 per transaction.
Withdraw £300 in three separate ATM transactions, and you pay up to £16.50 extra charges (£4.50 ATM fees and £12 DCC).
An average holidaymaker takes out £249 in up to five withdrawals from an ATM on a two-week holiday and spends an average of £234 on their debit/credit cards on food and activities in up to five different transactions. That is likely to rack up charges of nearly £27.
David Black, banking analyst at financial research firm Defaqto, says: "People must think about how they will manage money while abroad to avoid financial shocks later."
He says the average charge for a £100 purchase overseas is £2.87 on a credit card and £3.06 on a debit card. Charges for a £100 cash withdrawal by ATM are £5.60 and £3.96 respectively.
Defaqto's golden rules for travellers abroad include:
:: Put items costing £100-£30,000 on a credit card to ensure the credit card firm is jointly liable with the seller if anything goes wrong.
:: Use credit/debit cards which don't charge a foreign exchange fee on overseas transactions, or a fee for cash withdrawals.
:: Before departure, tell your card provider where and when you are going to lower risks of cards getting blocked.
:: Consider a prepaid card to limit spending: euro and dollar-denominated cards from FairFX and Caxton FX have the lowest overseas usage charges.
Of course, most of us don't rely entirely on plastic when we go abroad.
Which? Travel says nine out of 10 of its survey sample members plan to arrive at a holiday destination with local currency.
Bob Atkinson, at moneysupermarket.com, says: "Best exchange rates are available online: buying 1,000 euro in advance through Online FX costs £892.46, while purchasing last minute through Travelex at Heathrow would cost £949.31 - that's a gap of £57.
"To get the most bang from your buck, order cash online with free delivery and no commissions. If you can't do that, the Post Office or a high street travel agent is your next best option, rather than your normal bank."
Major high street banks are slammed by Which? Travel too: the bottom places in its customer satisfaction league table go to NatWest (63%); Barclays (62%), Lloyds TSB (62%), RBS (62%), HSBC (60%), Travelex (59%) and Halifax (54%).
Atkinson adds: "If you have no option to collecting currency at the airport, order in advance and pick up at the relevant bureau de change. Both Travelex and Thomas Cook offer this service.
"If you then want a prepaid card, which has no running costs and can topped up easily online or by telephone, the market leaders are FairFX and Caxton FX. FairFX charges for ATM use but has a favourable exchange rate while Caxton FX has no charges."
Debit card users, says Atkinson, should check charges before departure. There is often a minimum charge, typically £2-£3 per transaction, so lots of small transactions send charges mounting up.
Regular travellers might open a bank account with a debit card that doesn't charge any foreign usage fees: Norwich & Peterborough BS's Gold Classic account imposes no transaction, ATM or purchase fees.
Many credit cards also have fees and charges for use outside Britain, but users of the Halifax Clarity Credit Card or the Santander Zero Credit Card face no charges for overseas use.
Some credit cards designed for overseas ensure no ATM fees, but charge interest from the day of the withdrawal.
Sainsbury's Gold Card, however, allows an interest-free period on cash withdrawals if you pay off the transaction in full at the end of the month.
The other key point to remember is the cost of selling left over currency or exchanging everything back; buy back rates can be far below the selling rate.
Some providers, including Travelex and Thomson/First Choice shops, offer a guaranteed buy back rate at the price you paid for the currency, for a typical fee of £4.
With prepaid cards, money can be held for two years, so it may be worth keeping leftover money on these cards for future trips.
You might also save by selling spare currency back to friends and relatives heading to the same destination as you, at an exchange rate agreeable to both sides.
Atkinson says: "It's all about getting the right mix of cash, prepaid cards and credit cards to make money stretch as far as possible on your travels."
"For a monthly fee of £5, Sainsbury's Gold Credit Card allows fee-free overseas transactions and is the only credit card offering free overseas ATM withdrawals. It uses the standard rates for exchange - and annual family travel insurance is a key part of the deal."
'Best buys' to take abroad (Source: Defaqto)
:: Credit cards with no foreign exchange fees on overseas purchases:
Halifax Clarity
Metro Bank
Nationwide BS Gold Card
Post Office
Saga Platinum Credit Card (for 50 plus applicants only)
Sainsbury's Gold (costs £5 per month, with benefits)
Santander Zero
:: Credit cards with no fee on cash withdrawals or foreign exchange fees on overseas transactions:
Halifax Clarity (typically 12.9% on cash advances, from date of advance)
Metro Bank Personal (typically 13% APR)
Sainsbury's Gold (interest-free credit on purchases and cash advances if entire balance repaid on time each month)
Santander Zero
:: Debit cards with no fee on purchases or ATM cash withdrawals:
Cumberland BS current account
Metro Bank Personal
Norwich & Peterborough BS
Santander Zero (for qualifying mortgage, savings or investment customers)
:: Information: Sainsbury's Gold Card (0845 301 2724 and www.sainsburysfinance.co.uk); Caxton FX (0845 658 2223 and www.caxtonfx.com); Norwich & Peterborough BS (0800 883 322 and www.npbs.co.uk); Metro Bank (0345 0808 500 and www.metrobankonline.co.uk); Post Office (0800 077 8033 and www.postoffice.co.uk, plus branches)
Poundnotes
:: Barclaycard has extended the interest-free balance transfer deal on its Platinum Extended Balance Transfer Visa to 24 months. Customers also benefit from a reduced balance transfer fee of 2.80%, down from 3.20%, plus £20 cashback for those who transfer more than £3,000 and apply through a price comparison website such as Moneyfacts.co.uk.
Michelle Slade, at Moneyfacts.co.uk, says: "At 0% for 24 months, it's the longest balance transfer deal ever offered.
"The number of longer-term balance transfer deals has soared as competition has returned to credit cards, with Barclaycard topping the best buys for some months.
"Barclaycard already offered the longest interest-free balance transfer, so this increased term puts it head and shoulders above nearest rivals, MBNA and Virgin Money, currently offering 0% for 19 months.
"To make the most of a balance transfer, users should refrain from spending on the card because new purchases accrue interest at a much higher rate."
At moneysupermarket.com, Hannah Mercedes-Skenfield says: "Credit card wars hotted up when Halifax introduced a 20-month balance transfer deal to match Barclaycard's previous market leading offer.
"Barclaycard's response blows others out of the water. It is difficult to see it can be bettered."
:: With a one-year fixed rate of 3.55% AER, Norwich and Peterborough BS's E-Bond offers a rate that hasn't been bettered for almost 18 months, says Andrew Hagger of Moneynet.
Mutuals need retail savings to fund new mortgages, he says, so it's no surprise to see four of the current top seven one-year bonds coming from building societies.
A three-year Chelsea BS e-Bond pays 4.15% over three years, 4.85% gross over five.
With the rate gap on a four-year deal and a one-year deal only at 0.70%, Hagger reckons the incentive to opt for a longer term has faded (in February 2010 the difference was 1.35%).
:: Is Iraq really the place to stash spare cash? Amazingly, the FMG Iraq Fund has grown by 25% since its launch in May 2010, and boomed by an estimated 4.1% in June alone.
Johan Kahm, founder of Malta-based FMG who visited Iraq last month, says: "Iraq is turning the corner. We are looking at a unique investment opportunity where we hope to make outsized returns for the next five to 10 years."
For more information, visit www.fmgfunds.com
:: Thanks to the new Junior ISA, to be launched soon for children who missed out on Child Trust Funds, some youngsters could reach adulthood with a six-figure sum in the bank.
Fund manager Fidelity International, preparing to offer the Junior ISA from November 1, says the maximum £3,600 per year invested in the funds and investment trusts on its fund supermarket could generate a lump sum of £101,336.52 at 18, assuming 5% growth, or £163,064.60 at 21.
Fidelity International's Rob Fisher says: "Junior ISAs can teach an important lesson to young people. The earlier they start saving, the earlier they benefit from compounding their assets and long-term stockmarket performance."
The Junior ISA is a tax efficient savings vehicle similar to an adult ISA. Money is locked away for the child who can withdraw the proceeds at 18.
:: High five savers
Phone No Rate Account Period Deposit Interest paid
Whiteaway Laidlaw Bank 0845 266 6611 4.75% Fixed Term Deposit 1 Five Year Bond £5,000 Yly
Birmingham Midshires 0845 602 2828 4.65% (F) Fixed Rate Bond Five years £1 Yly
AA www.theAA.com 3.35% AA Internet Access ISA None £500 Yly
Whiteaway Laidlaw Bank 0845 266 6611 3.35% 120 Day Premium Notice 120 Days £1,000 Yly
Santander 0800 234 6065 3.30% Flexible ISA Issue 3 Instant £1 Yly
:: Top five borrowers
Phone No Rate Period Max% Adv Fee Incentive
HSBC 0800 494999 2.59% variable for term 60% Yes
Mkt Harboro BS 01858 412250 2.65% for three years 75% £195 Yes
First Direct 0845 610 0100 2.79% variable for term 65% £199 Yes
Yorkshire BS 0845 120 0874 2.79% to 30/09/13 75% £95 Yes
Melton Mowbray BS 01664 414141 3.35% for term 75% £99 Yes
Code:
*K- Operated by Internet, Telephone, or Post
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
In theory, travellers should be having a field day on their holiday money as competition is fierce between credit and debit card providers, specialist currency firms are going online to slash costs, and there's an avalanche of prepaid cards.
There are new entrants in the market too: Metro Bank, with eight branches in the London area, has euros and dollars available in stores at attractive rates for instant collection, with other currencies available the next day.
The my Travel Cash card promises no ATM withdrawal fees, plus 1% unlimited cashback on all purchases. It claims a £100 withdrawal in euros could save up to £4.75 against a standard debit or credit card.
The choice is overwhelming, but the current issue of Which? Travel magazine claims that 39% of its sample survey used the Post Office to exchange money in the past year.
Only 1% used the Caxton FX prepaid card, but this, says Which? Travel, got the highest customer satisfaction score (89%).
Caxton FX, in its own survey, reckons British travellers could waste £1 billion on hidden charges this summer - on bank charges, ATM withdrawals and paying for food and activities with debit or credit cards while abroad.
It also fears more than 13 million Britons could be hit by hidden dynamic currency conversion (DCC) charges - adding another £20 in hidden costs to the average £500 spent on a two-week holiday.
Retailers typically charge around 4% for this fee and catch out consumers paying for items in supermarkets and restaurants or withdrawing cash from ATMs abroad.
Caxton FX managing director James Hickman says: "Too many people are caught out when they spend abroad. Most ATMs give the option to use local currency or pay in pounds.
"You are also at risk when eating out. When the bill arrives, you may be offered the facility to pay in pounds rather than local currency.
"The 4% fee goes straight to the retailer, so it's in his interest to dupe unsuspecting customers. You can't have second thoughts when you get back, as it is a perfectly legal charge.
"It is ridiculous so many consumers lose out, when they need to cut costs at the moment. Simple things such as requesting transactions to appear on your statement in the local currency rather than pounds sterling save money, especially in the long run - and this all adds up."
Hickman also points out that holidaymakers are hit by additional ATM fees when they withdraw money abroad - on average charges of £1.50 per transaction.
Withdraw £300 in three separate ATM transactions, and you pay up to £16.50 extra charges (£4.50 ATM fees and £12 DCC).
An average holidaymaker takes out £249 in up to five withdrawals from an ATM on a two-week holiday and spends an average of £234 on their debit/credit cards on food and activities in up to five different transactions. That is likely to rack up charges of nearly £27.
David Black, banking analyst at financial research firm Defaqto, says: "People must think about how they will manage money while abroad to avoid financial shocks later."
He says the average charge for a £100 purchase overseas is £2.87 on a credit card and £3.06 on a debit card. Charges for a £100 cash withdrawal by ATM are £5.60 and £3.96 respectively.
Defaqto's golden rules for travellers abroad include:
:: Put items costing £100-£30,000 on a credit card to ensure the credit card firm is jointly liable with the seller if anything goes wrong.
:: Use credit/debit cards which don't charge a foreign exchange fee on overseas transactions, or a fee for cash withdrawals.
:: Before departure, tell your card provider where and when you are going to lower risks of cards getting blocked.
:: Consider a prepaid card to limit spending: euro and dollar-denominated cards from FairFX and Caxton FX have the lowest overseas usage charges.
Of course, most of us don't rely entirely on plastic when we go abroad.
Which? Travel says nine out of 10 of its survey sample members plan to arrive at a holiday destination with local currency.
Bob Atkinson, at moneysupermarket.com, says: "Best exchange rates are available online: buying 1,000 euro in advance through Online FX costs £892.46, while purchasing last minute through Travelex at Heathrow would cost £949.31 - that's a gap of £57.
"To get the most bang from your buck, order cash online with free delivery and no commissions. If you can't do that, the Post Office or a high street travel agent is your next best option, rather than your normal bank."
Major high street banks are slammed by Which? Travel too: the bottom places in its customer satisfaction league table go to NatWest (63%); Barclays (62%), Lloyds TSB (62%), RBS (62%), HSBC (60%), Travelex (59%) and Halifax (54%).
Atkinson adds: "If you have no option to collecting currency at the airport, order in advance and pick up at the relevant bureau de change. Both Travelex and Thomas Cook offer this service.
"If you then want a prepaid card, which has no running costs and can topped up easily online or by telephone, the market leaders are FairFX and Caxton FX. FairFX charges for ATM use but has a favourable exchange rate while Caxton FX has no charges."
Debit card users, says Atkinson, should check charges before departure. There is often a minimum charge, typically £2-£3 per transaction, so lots of small transactions send charges mounting up.
Regular travellers might open a bank account with a debit card that doesn't charge any foreign usage fees: Norwich & Peterborough BS's Gold Classic account imposes no transaction, ATM or purchase fees.
Many credit cards also have fees and charges for use outside Britain, but users of the Halifax Clarity Credit Card or the Santander Zero Credit Card face no charges for overseas use.
Some credit cards designed for overseas ensure no ATM fees, but charge interest from the day of the withdrawal.
Sainsbury's Gold Card, however, allows an interest-free period on cash withdrawals if you pay off the transaction in full at the end of the month.
The other key point to remember is the cost of selling left over currency or exchanging everything back; buy back rates can be far below the selling rate.
Some providers, including Travelex and Thomson/First Choice shops, offer a guaranteed buy back rate at the price you paid for the currency, for a typical fee of £4.
With prepaid cards, money can be held for two years, so it may be worth keeping leftover money on these cards for future trips.
You might also save by selling spare currency back to friends and relatives heading to the same destination as you, at an exchange rate agreeable to both sides.
Atkinson says: "It's all about getting the right mix of cash, prepaid cards and credit cards to make money stretch as far as possible on your travels."
"For a monthly fee of £5, Sainsbury's Gold Credit Card allows fee-free overseas transactions and is the only credit card offering free overseas ATM withdrawals. It uses the standard rates for exchange - and annual family travel insurance is a key part of the deal."
'Best buys' to take abroad (Source: Defaqto)
:: Credit cards with no foreign exchange fees on overseas purchases:
Halifax Clarity
Metro Bank
Nationwide BS Gold Card
Post Office
Saga Platinum Credit Card (for 50 plus applicants only)
Sainsbury's Gold (costs £5 per month, with benefits)
Santander Zero
:: Credit cards with no fee on cash withdrawals or foreign exchange fees on overseas transactions:
Halifax Clarity (typically 12.9% on cash advances, from date of advance)
Metro Bank Personal (typically 13% APR)
Sainsbury's Gold (interest-free credit on purchases and cash advances if entire balance repaid on time each month)
Santander Zero
:: Debit cards with no fee on purchases or ATM cash withdrawals:
Cumberland BS current account
Metro Bank Personal
Norwich & Peterborough BS
Santander Zero (for qualifying mortgage, savings or investment customers)
:: Information: Sainsbury's Gold Card (0845 301 2724 and www.sainsburysfinance.co.uk); Caxton FX (0845 658 2223 and www.caxtonfx.com); Norwich & Peterborough BS (0800 883 322 and www.npbs.co.uk); Metro Bank (0345 0808 500 and www.metrobankonline.co.uk); Post Office (0800 077 8033 and www.postoffice.co.uk, plus branches)
Poundnotes
:: Barclaycard has extended the interest-free balance transfer deal on its Platinum Extended Balance Transfer Visa to 24 months. Customers also benefit from a reduced balance transfer fee of 2.80%, down from 3.20%, plus £20 cashback for those who transfer more than £3,000 and apply through a price comparison website such as Moneyfacts.co.uk.
Michelle Slade, at Moneyfacts.co.uk, says: "At 0% for 24 months, it's the longest balance transfer deal ever offered.
"The number of longer-term balance transfer deals has soared as competition has returned to credit cards, with Barclaycard topping the best buys for some months.
"Barclaycard already offered the longest interest-free balance transfer, so this increased term puts it head and shoulders above nearest rivals, MBNA and Virgin Money, currently offering 0% for 19 months.
"To make the most of a balance transfer, users should refrain from spending on the card because new purchases accrue interest at a much higher rate."
At moneysupermarket.com, Hannah Mercedes-Skenfield says: "Credit card wars hotted up when Halifax introduced a 20-month balance transfer deal to match Barclaycard's previous market leading offer.
"Barclaycard's response blows others out of the water. It is difficult to see it can be bettered."
:: With a one-year fixed rate of 3.55% AER, Norwich and Peterborough BS's E-Bond offers a rate that hasn't been bettered for almost 18 months, says Andrew Hagger of Moneynet.
Mutuals need retail savings to fund new mortgages, he says, so it's no surprise to see four of the current top seven one-year bonds coming from building societies.
A three-year Chelsea BS e-Bond pays 4.15% over three years, 4.85% gross over five.
With the rate gap on a four-year deal and a one-year deal only at 0.70%, Hagger reckons the incentive to opt for a longer term has faded (in February 2010 the difference was 1.35%).
:: Is Iraq really the place to stash spare cash? Amazingly, the FMG Iraq Fund has grown by 25% since its launch in May 2010, and boomed by an estimated 4.1% in June alone.
Johan Kahm, founder of Malta-based FMG who visited Iraq last month, says: "Iraq is turning the corner. We are looking at a unique investment opportunity where we hope to make outsized returns for the next five to 10 years."
For more information, visit www.fmgfunds.com
:: Thanks to the new Junior ISA, to be launched soon for children who missed out on Child Trust Funds, some youngsters could reach adulthood with a six-figure sum in the bank.
Fund manager Fidelity International, preparing to offer the Junior ISA from November 1, says the maximum £3,600 per year invested in the funds and investment trusts on its fund supermarket could generate a lump sum of £101,336.52 at 18, assuming 5% growth, or £163,064.60 at 21.
Fidelity International's Rob Fisher says: "Junior ISAs can teach an important lesson to young people. The earlier they start saving, the earlier they benefit from compounding their assets and long-term stockmarket performance."
The Junior ISA is a tax efficient savings vehicle similar to an adult ISA. Money is locked away for the child who can withdraw the proceeds at 18.
:: High five savers
Phone No Rate Account Period Deposit Interest paid
Whiteaway Laidlaw Bank 0845 266 6611 4.75% Fixed Term Deposit 1 Five Year Bond £5,000 Yly
Birmingham Midshires 0845 602 2828 4.65% (F) Fixed Rate Bond Five years £1 Yly
AA www.theAA.com 3.35% AA Internet Access ISA None £500 Yly
Whiteaway Laidlaw Bank 0845 266 6611 3.35% 120 Day Premium Notice 120 Days £1,000 Yly
Santander 0800 234 6065 3.30% Flexible ISA Issue 3 Instant £1 Yly
:: Top five borrowers
Phone No Rate Period Max% Adv Fee Incentive
HSBC 0800 494999 2.59% variable for term 60% Yes
Mkt Harboro BS 01858 412250 2.65% for three years 75% £195 Yes
First Direct 0845 610 0100 2.79% variable for term 65% £199 Yes
Yorkshire BS 0845 120 0874 2.79% to 30/09/13 75% £95 Yes
Melton Mowbray BS 01664 414141 3.35% for term 75% £99 Yes
Code:
*K- Operated by Internet, Telephone, or Post
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
© 2012 Press Association