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.
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