Cut the cost of… foreign exchange
Business Traveller offers tried-and-tested tips on getting more for your money. This month: foreign exchange.
1) Do your research
The more you plan, the more you’re likely to save. “Shop around,” says Stephen Hughes, director at broker Currencies (currencies.co.uk). “The biggest mistake people make is to go somewhere they’re used to, and just accept that for what it is.” Keeping your eyes open can pay off even after a transaction – Travelex’s online Price Promise guarantees the best rate on the total price or the difference refunded. Register for its online Happy Hour, which sells at better rates for a limited time. You could also try price comparison websites to find good deals – travelmoney.moneysavingexpert.com has an option to search for delivery, collection or buy-back.
2) Avoid airport outlets
Don’t leave it until the airport to buy your currency, as you will invariably get a poor rate and pay commission of typically a flat rate of a few pounds, or 1.5 per cent for a few hundred pounds. If you do collect at the airport, pre-booking online can give you better rates.
3) Try independents
Smaller chains can offer better value. Thomas Exchange Global has four London branches – one day in May, its Victoria branch was selling euros at 1.21 and US dollars at 1.6 to the pound, while the Post Office was advertising euros at 1.19 and dollars at 1.57.
4) Avoid extra charges
How you pay might affect the total cost. For instance, while the Post Office doesn’t charge commission, if you pay by Mastercard you will be charged 1.5 per cent of the order value to a maximum of £15.
5) Use an FX specialist
Companies that specialise in foreign exchange and operate online or by phone keep rates lower than banks. According to a December 2011 report by Travelsupermarket, charges on debit and credit card transactions abroad range from 3 per cent to 6 per cent. If you buy before you travel through a broker, you will save – Currencies Direct, for example, claims to sell at around 2.5 per cent less than banks.
6) Secure a rate
Ensure your brokerage contract suits your needs. A “spot rate” gets you cash immediately at whatever rate is published by the provider that day. A “forward contract” fixes the rate you wish to buy at for a set amount of time – it’s used when purchasing properties abroad, as it means you’ll know exactly how much it will cost. If time is no issue, “limit orders” allow you to set the target rate you want to buy at.
7) Know your broker
Good rates can be fleeting, so make sure your broker has you on speed dial. “The more information we have leading up to when you need to make a transaction, the more we can help,” says Alistair Cotton, senior analyst at Currencies Direct. Online broker Fair FX sends out newsletters when the rate moves significantly.
8) Be your own broker
Cotton says: “The news effectively drives FX. For instance, if Spain is in trouble, [it may be] a good time to buy euros. If it’s a good rate, go for it every time. Say it’s over 1.2 on the euro, people should buy by the bucket load.” Travelex’s online Travel Rate Tracker monitors currency movements and you can set email alerts at a pre-selected date or rate threshold.
9) Strike a balance
Estimate how much day-to-day cash you will need to avoid returning home with a wallet full of currency. However, if you travel somewhere regularly, you may be better off exchanging too much – some FX companies offer free buy-back if you change over a certain amount (otherwise, changing currency back is not worth it). Change too little, and you may be forced to put charges on your card unexpectedly.
10) Compare cards
Your bank may not offer the best deal, so do your research. Natwest and Barclays credit cards charge a 2.75 per cent transaction fee abroad (ATM withdrawals incur an additional handling fee and interest is charged, so this is never advisable). The Halifax Clarity credit card charges no transaction or ATM withdrawal fees.
11) Get a pre-paid card
Currencies Direct offers a euro card that charges a fee of e1.25 at ATMs, while Fair FX offers a dollar, euro and sterling card that costs £9.95 and charges £1, e1.50 or US$2 at an ATM. Money can be topped up online or on the phone. Outlets such as the Post Office offer similar products, but the rate cannot be pre-arranged as with FX specialists. Travelex’s cash passport is available in six currencies and carries no fees for purchase transactions or ATM withdrawals. Business accounts, such as the one offered by Fair FX, allow employers to determine when a card is topped up and by how much.
12) Get an account
Some high-street banks allow you to have foreign currency accounts. “It’s about keeping an eye on the market and buying five or ten thousand at a time,” Hughes says. “Just make sure you’re buying at the right time.”
13) Change overseas
Sometimes your destination can offer better rates of exchange – check before you fly, then look for small, independent outlets for even better rates.
- Have a tip to share? Visit businesstraveller.com/discussion
AnthonyDunn - 29/06/2012 15:24
And do NOT make the mistake of ever assuming that you will be able easily and quickly to obtain cash from ATMs abroad. My wife and I bank with First Direct/HSBC which uses the VISA network. We have never had problems with obtaining cash in any of France, Italy, Turkey, Greece, Spain, the Low Countries etc.
Last year, we pitched up in Berlin and were surprised when we could not use the Visa debit card or, indeed any Visa card, in the U-Bahn ticket machines at Tegel airport. Fortunately, we had the cash to buy travel passes. This experience continued the following day when we tried to find an ATM that would issue us with cash.
We ended up at the Deutsche Bank branch near the Philharmonie, to have the bank teller advise us that "Oh, no we do not accept such cards in Germany..." holding my wife's HSBC card up as if it were a piece of dog muck off the pavement. We ended up finding a currency exchange office beneath the FriedrichStraße U-Bahn/S-Bahn/D-Bahn interchange station that would provide €s from a UK bank card.
Only some places would accept plastic cards by way of payment - by no means all retail and service outlets in Germany will do so. Spending an entire morning chasing around Berlin trying to obtain cash when you are surrounded by banks and ATMs is stupefyingly annoying.
Later last year, we ventured to Vienna, little expecting that we were about to have not just a comparable but an even worse experience. This was truly running the gauntlet of Visa network unreliability. We tried several ATMs that had Visa logos only to have the card either returned with no cash or the machine going through the motions of attempting to retain the card.
At our third such experience, we ended up ringing First Direct in the UK to find out what was going on and to alert them to three attempted transactions without any cash issuance.
We finally tracked down a travel currency bureau the following day (starting to get rather short on the readies by this stage...) who expressed surprise and told us to try another machine next to their bureau. This time, seemingly randomly because it was the self-same Bank of Austria (Unicredit group) that we'd tried the night before, it worked.
Having taken up the issue with First Direct/HSBC in the UK, we were told that the decision to terminate access to Maestro had been taken and it was Visa or nothing. In our case, this largely meant nothing as the reliability score for Visa across Germany and Austria is nudging just above zero.
We are now trying to obtain the names and contact details of the Visa Europe country managers for Germany and Austria with whom to take up our complaints about the utter unreliability of the Visa network in Germany and Austria, the substantial amount of wasted time caused by this and the very considerable annoyance to boot.
Don't ever make the mistake of assuming that you can just pitch up anywhere these days and you will easily be able to obtain cash/make purchases using plastic - particularly if that plastic is Visa. There are still countries which have financial and e-commerce systems out of the Dark Ages and Germany and Austria are right up there at the top of this list.
ADD A COMMENT »