"There are plenty of options for your travel money, and it shouldn't be the last thing you think about before your trip. Otherwise you will be counting the cost," says Bob Atkinson, a travel expert at comparison site Moneysupermarket.com.
Don't be short exchanged
An airport bureau de change may be convenient, but the exchange rates are poor and don't be fooled by boasts of 0 per cent commission; the real cost is simply built into the rate.
If you're travelling to a place you visit regularly, check the local bureaux de change to see if they beat British rates. If not, it's usually best to pre-order your foreign cash from online currency exchange specialists.
"Buying currency online these days is in most cases commission free, but it's important to compare exchange rates and delivery charges," says Andew Hagger of Moneynet. "The most competitive providers include ICE, FairFX, Travelex and Post Office. However, in most cases, for orders of less than £500 you'll have to pay delivery charges of £4 to £5."
These often beat high street rates; however, check whether your bank applies fees for foreign currency transactions. All credit cards and some debit cards, including Barclays and Santander, charge a cash withdrawal fee so if possible use a different debit card or collect the money yourself and pay in cash. Also, stick with reputable companies because foreign exchange is not overseen by the Financial Services Authority (FSA).
The saving:
For €1,000, it would cost you £966.28 at Travelex Heathrow airport, but only £915.33 at Travelex Online, a saving of £50.95, according to figures from Moneysupermarket.
Credit cards
Spending on credit abroad can mean being stung by charges, with "loading" fees in the case of Barclaycard of up to 2.75 per cent. So £100 worth of spending will set you back £102.75. Cash withdrawal fees of about £3 per withdrawal are also common, plus immediate interest on top.
The Halifax Clarity Card has no foreign exchange loading or cash withdrawal fee, so you get the best possible exchange rate. However, you will be charged interest on withdrawals at an annual percentage rate (APR) of 12.9 per cent whether you repay your balance in full or not.
The Sainsbury's Gold credit card costs £5 per month but it comes with worldwide family travel insurance and is also fee free for overseas spending and cash withdrawals. Unlike the Halifax card, you won't be charged interest on withdrawals provided you pay them off in full each month.
The saving:
Five purchases totalling €1,000 would cost £912.97 on the Barclaycard Platinum, but only £887.67 with the Halifax Clarity Card.
Debit cards
Debit cards are some of the worst offenders. Halifax's debit card levies a spending penalty of £1.50 per payment, a loading fee of 2.75 per cent and a cash withdrawal fee of £1.50. NatWest's Current Plus Account debit cardholders also pay a point-of-sale fee of £1.25, a 2.75 per cent loading fee, and a 2 per cent ATM usage fee.
If you prefer to take a debit card there are a few good options, such as the Gold Classic card from Norwich & Peterborough (N&P) which offers fee-free spending and ATM withdrawals. There is a £5 monthly fee unless you pay £500 a month into your linked account.
Nationwide's FlexAccount Visa debit card no longer offers free overseas spending in Europe, but it is still competitive with a 2 per cent fee on spending in foreign countries and a £1 charge for overseas cash withdrawals.
The saving:
Five cash withdrawals totalling €1,000 would cost £887.67 with Norwich & Peterborough but £932.98 on the NatWest Current Plus debit card.
Prepaid cards
These don't have a credit facility but can be loaded with cash in the desired currency before you travel and then used as a debit card abroad.
"By preloading currency on to a card, holidaymakers know exactly what they have to spend rather than blindly 'agreeing' to an exchange rate at the point of sale with their bank card overseas," says Eleanor Drew, manager of PocketCurrency.
There are fees to watch out for including card application fees of up to £10, transaction fees, ATM withdrawal fees (typically up to £3), top-up charges and even monthly fees. But the best, such as the FairFX prepaid card, have no foreign loading fees and can be topped up for free by debit card or bank transfer.
"I think prepaid cards are a great way of taking your holiday cash overseas. It's certainly worth considering rather than risk getting a raw deal on the debit or credit card that you usually rely on in the UK," says Moneynet's Andrew Hagger.
Cash withdrawals cost €1.50 with the FairFX card, and although this is still less than most credit or debit cards, both the Travelex and the CaxtonFX cards are fee-free.
The saving:
Five ATM withdrawals totalling ¤1,000 would cost £913 on the FairFX card, but £907.77 with Travelex.
And finally...
Beware of dynamic currency conversion (DCC) when you're asked if you want to pay in sterling or the local currency. In nearly all cases, stick with the local currency because most retailers or ATMs apply their own, uncompetitive conversion rate.
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