Travel money: top 5 holiday spending mistakes

We’re wasting more than £320 of spending money every time we go abroad

All change: exchange charges vary hugely (PA)

The bank holiday is within touching distance, which only means one thing – the start of the summer season and the promise of that precious two weeks away from it all. Thanks to travel comparison sites and best buy tables we’re getting better at hunting down holiday deals all the time.

Unfortunately that doesn’t extend to our haphazard approach to spending cash – a mistake that costs us hundreds of pounds every time we get away from it all.

Think that can’t possibly include you? How many of our top 5 holiday spending mistakes sound familiar?:

Paying in pounds

Travellers who spend using a credit or debit card abroad often choose to pay in pounds when given a choice, as it’s easier to understand how much they are paying. However, Ali Steed, editor of the money-saving website MyMoneyDiva.com, warns travellers they should always choose to be charged in the local currency, whether they are withdrawing cash or paying a bill.

“Choosing the local currency means you will pay your bank's exchange rate, while choosing to be billed in your home currency of 'GBP' will often mean you are paying an exchange rate imposed by the local provider, which could be significantly higher than your bank would charge you.”

Withdrawing cash

There are a whole host of good reasons to use a card overseas, but withdrawing cash can drastically increase the cost of currency.

“It’s unwise to withdraw cash on credit cards abroad, as you’ll likely be stung with a two to three per cent fee on top of your withdrawal,” warns Tashema Jackson, a money commentator at uSwitch.com.

“If you can’t avoid spending on a card with transaction fees, check what charges apply before travelling. What happens on holiday won’t stay on holiday and you could avoid a nasty surprise on your return.”

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Changing money at the airport

It’s possible to change money well in advance of a holiday, yet thousands of people only get around to doing so at the airport before they fly. Research from FairFX shows that doing so can leave you up to £320 worse off for every £1,000 you exchange, thanks to “wild discrepancies” between rates offered at different airports.

Travellers can save money by shopping around for the best rates and buying in advance, even ordering the night before for airport collection can bag a cheaper rate. But that’s not the only way travellers are getting stung when exchanging money.

Nick Hill, money expert for the Money Advice Service, says: “Some providers may charge you interest if you buy foreign currency using a credit card because it can be classed as a cash withdrawal, so make sure you compare the pros and cons of the different payment methods.”

Taking the wrong credit card

Using a credit card to pay for purchases while travelling can be a safe way to spend, but without the right card the charges can swiftly rack up. Analysis from Gocompare.com shows that a traveller using a credit card that charges for overseas use in order to withdraw cash could end up paying almost £8 for every £100 they take out – hardly a competitive rate.

Matt Sanders, credit card spokesperson at the comparison site, explains: “The average fee charged for overseas card use is 2.9%, which can easily add up if you’re doing the bulk of your holiday spending on your credit card or plan on making any big purchases while you’re away. Remember, this fee is added on top of any additional transaction fees you might face, for instance a restaurant service or credit card charge.

“There are some cards on the market that don’t charge a fee for overseas use, so if you are considering spending on plastic while you’re on holiday, it could be worth getting online and shopping around for a card that suits your needs while you’re away.”

Forgetting foreign currency

We don’t just pay over the odds to exchange our holiday cash, many of us then make the situation worse by simply dumping our foreign currency in a drawer at home and forgetting about it.

Research from Visa Europe suggests that British holidaymakers have an average of £55.25 in leftover foreign currency simply dumped in the home and ignored.

Kevin Jenkins, managing director UK & Ireland, Visa Europe comments: “British holidaymakers could be saving money instead of returning home with foreign currency, which likely remains unused and gathering dust. Our research suggests that as a nation, we have accumulated £663m of foreign currency in our homes – hard-earned money which could be better put to use or donated to charity.”

Almost as bad, a third of holidaymakers say they blow unused currency at the airport to save having to exchange it, even if they aren’t buying bargains.

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