Travel Money - Where to get the best deals

By Emma Tyrrell

18 May 2005

Whether you're planning to flash your Florins in the salsa bars of Aruba, bum around the Andes on your Bolivianos, or simply eke out your Euros on the French Riviera, chances are you'll be needing some holiday money in the coming months.

But while many of us leave it to the last minute to sort out our travel wonga, a very little time and effort can knock pounds off the cost of your spending money, leaving extra dosh for that glamorous holiday wardrobe, or for a few more fancy cocktails when you reach your destination.

I admit, when it comes to forex procrastination, I've been as guilty as the next girl. My travel money used to be sorted out approximately ten minutes before boarding the plane, at the first airport terminal kiosk that caught my eye.

But these days, with many of the cheapest foreign exchange services offering to deliver the money to your door next day, there's little excuse for not getting your holiday cash act together.

Foreign exchange services make their money in two ways – from commission and from the difference between the exchange rate at which they buy and sell currencies. Many services now proclaim their commission-free status, but that won't make their offer the cheapest unless their exchange rates are also competitive. Delivery charges can also vary.

The best plan is to do a little shopping around, online and over the phone, ignoring the quoted exchange rates and commission charges and simply asking how much foreign currency you'll get for the amount of pounds you have. Alternatively, if you need a specific number of Euros, Dollars, Ouguiya, or Dong, ask how much they will cost you, including all charges. Exchange rates change from day to day, so if you want to make a proper comparison, it's a good idea to do all your checking in a single day.

We trawled the internet and called high street banks and bureaux de changes last Thursday, asking how much 500 Euros would cost us. The cheapest deal we found was £349.65 from commission free exchange service Interchange FX, but only if you are able to pick up from its Marble Arch bureau in central London. It does offer a postal service, but the £6 charge brings the cost to £355.65, which is still competitive, but pricier than some other deals with poorer rates but cheaper delivery.

Another problem, for anyone wanting the cash in a hurry, is that the postal service is only available if you pay by BACS transfer from your bank account. BACS transactions can take five working days to clear, which means you would need to get organised and leave well over a week for your money to arrive.

The next best deals we found are from 1stholidaystore.co.uk and bureau-de-change.net. Both would cost £350.85, as long as you pay by debit card, and both act as portals for the Online FX website. Online FX also quoted £350.85, but levied a £4.95 charge for insured next day delivery on top. However, 1stholidaystore.co.uk and bureau-de-change.net have negotiated free delivery to anyone paying by debit card. If you pay by credit card you'll pay £4.95 delivery with bureau-de-change.net or £3.95 with 1stholidaystore.co.uk.

Paying by credit card is probably not a great idea anyway, as your card provider will typically charge you a 1.5 per cent cash handling fee. Some Delta and Visa debit cards also charge a cash advance fee for currency purchases.

Travelex's commission free online service, which comes fourth in our table, has a price promise which guarantees to match any other offer, as well as paying you the difference. It would therefore match the £350.85 price quoted by 1stholidaystore.co.uk and bureau-de-change.net, as well as paying you back the 45p difference between that and its own online quote of £351.30. However, it offers no delivery service for that price. Instead you must pick up your money from one of 37 branches at the UK's airports and ports. It would also match the cheaper Interchange FX offer, though, and for most people Travelex's airport and port pick-up points would be much more convenient than using Interchange FX's Marble Arch bureau.

Travelex's price promise is only available if you book your currency online. If you go direct to one of its bureaux de changes branches you are also likely to get a less competitive rate, and will have to pay 1.5 per cent commission on top. If we had bought our €500 Euros at the Travelex branch in Heathrow Terminal 4 it would have cost us £363.94, including £5.37 commission.

But you can forget even the cheapest bureaux de changes, online or otherwise, if you are lucky enough to have a Flex current account with the Nationwide building society. When you make purchases abroad, or use your card to withdraw money from a foreign ATM, your debit or credit card provider will translate the foreign currency cost into sterling. But while the vast majority add a loading to the “wholesale” exchange rate, usually amounting to a 2.75 per cent charge, Nationwide is one of the very few which convert the euros, rupees, pesos, or whatever, using the wholesale rate itself.

This is true of both its debit and credit card, but if you use your credit card to withdraw money you will have to pay a cash withdrawal charge of 1.5 per cent or £1.50, which ever is more. Add to that the fact that Nationwide will charge interest on cash withdrawals from day one (like most credit card providers), even if you pay your bill off in full each month, and you can see the advantage of the debit card.

If you travel a lot, it may even be worth taking out a Nationwide Flex account for that purpose. If instead of sorting out your €500 Euros before you left the UK, you used your Nationwide debit card and withdrew €500 from an ATM in Paris, for example, it would cost you just £342.15, cheaper than even the best foreign exchange deal.

Maybe, just sometimes, procrastination is a good thing.

*or pay £6 for delivery, paying by BACs transfer from your bank
**Rates differ from branch to branch. Cost quoted is for the bureau at Heathrow Terminal 4