Conal Gregory: Don’t wait until the airport to splash out on your holiday cash

With Brexit debates still continuing, sterling is a far more volatile currency than usual.

Do not be hoodwinked by outlets which advertise zero commission as they make their margin on the exchange rate.

The most expensive way to exchange money is at airport and port bureaux de change when no prior order has been placed. Expect to receive up to 0.38 euros less than the interbank rate, which is the wholesale conversion rate used by banks.

In a recent survey of bureaux in 13 UK airports by the currency exchange firm Fair FX, Leeds Bradford airport was found to have the lowest rate, offering just 77 euro cents for each pound. Such poor rates mean that British holidaymakers can lose £14.5bn annually, according to market researcher Consumer Intelligence.

If it is more convenient to pick up foreign money at the start of a journey, check the rate offered by booking online in advance which is likely to be far more competitive. The money is also likely to be prepared to save time.

Quite often well-known retailers are overlooked, notably Marks & Spencer and the Post Office. The same rates are not necessarily applied between stores away from and inside airports.

Few realise the scale of foreign exchange fraud. In May the regulator, the Financial Conduct Authority, revealed that 1,800 people succumbed to bogus online trading platforms last year, losing £14,600 each on average. The fraudsters use fake celebratory endorsements and sometimes the registration number of a genuine provider.

Therefore, before even revealing your personal details, check with the FCA on the legitimacy of the company offering foreign currency exchange.

If intending to use a bank debit card abroad, check on the likely charges which usually range from 2.5 to five per cent and may additionally have a transaction fee, meaning that it pays to make one larger deduction rather than several.

Many new banks – often termed ‘challenger’ as they are challenging the traditional high street names – provide keener rates to attract custom. Both Monzo and Starling make no charge for debit card payments abroad. They offer MasterCard’s exchange rate which is close to the interbank one.

Inform your bank that you are going abroad as it may otherwise block withdrawals and impose a daily limit. Monzo only permits free withdrawals via an ATM up to £200 monthly and then charges three per cent.

If happy using a financial app, Revolut provides an exchange and transfer money at interbank rates. For security, it applies a £200 maximum at an ATM abroad. The account can have additional funds added by either a credit or debit card which is free if such a card was issued in the European Economic Area. It will also accept using Apple Pay and Google Pay if the device used will support it.

Pre-payment currency cards have replaced travellers’ cheques. The card has a sum credited in the chosen foreign currency. Many like this as they know the exact rate and how much is available to spend. Check though on the conversion made as there can be a disparity between the one advertised and the one confirmed. Caxton FX is a leading supplier.

Credit cards are widely accepted abroad but it is worth checking as some resorts clearly have united most retailers to refuse them, notably in eastern Europe. This forces tourists to take out local currency at ATMs with all the attendant costs.

Do not assume that even major cruise operators and hotel groups will accept all international money plastic. Cunard, for instance, will not take MasterCard.

It is easy to forget that a cash withdrawal using a credit card at an ATM means that interest starts accruing immediately and is additional to other fees, such as an exchange conversion charge. The actual amount to be charged will not be shown on the screen. Tesco imposes a 3.99 per cent fee for each transaction.

Most credit card and charge card providers make not insignificant charges for non-sterling use. For the latter, American Express – both for its Green and Platinum cards – raises a 2.99 per cent fee in Europe and the rest of the world. Allied Irish and First Trust Bank charge 2.75 per cent for their charge cards.

Transacting abroad with credit cards can bring charges of two per cent (such as Bank of China) and 2.75 per cent (Allied Irish, Bank of Ireland, Capital One, Co-op, First Trust, John Lewis, Sainsbury’s Bank, smile, Tesco). However, some providers raise their fee to 2.95 per cent (Bank of Scotland, Lloyds, MBNA, Newday, TSB).

However, according to a survey by Moneyfacts, a few providers levy even higher rates of 2.99 per cent, notably American Express, Asda Money, British Airways, First Direct, HSBC and M&S Bank (owned by HSBC).

To avoid charges, look for a provider who has no fee for credit card use anywhere in the world, such as Tandem and Ulster. There are several others offering this benefit but check that the card applied for is the specific one with no foreign loading.

Barclaycard, for example, has eight different credit cards but only one (Platinum Cashback Plus) has promised no charge for foreign use until late August 2023.

Creation Financial offer five cards under its own name with a 2.99 per cent fee but free on Creation Everyday MasterCard. Similarly, single examples from other credit cards are available from Halifax (Clarity), Post Office Money (Online Platinum), Virgin Money (12 months Travel) and Yorkshire Bank (‘B’).

In addition, NatWest and Royal Bank of Scotland have two each with no loading: its straightforward MasterCard and a Reward Black. Santander offers three with free foreign transactions: All in One, World Elite and Zero.

Only existing customers can enjoy free global use with Nationwide Building Society’s Select.

All the named credit cards exempt from foreign use are fee-free except the Reward Black from NatWest and RBS, which costs £84 annually, and two from Spanish-owned Santander: All in One at £3 monthly, World Elite at £15 monthly.

One clever way to catch the unwary is for an outlet – frequently an hotel or restaurant – to offer to immediately convert the cost into sterling.

Refuse as the rate will be to its advantage.

If either travelling abroad regularly or likely to make a substantial payment in another currency, open a current account operated in that currency. Many banks provide this facility in euros and US dollars and some in additional currencies.

This is far safer than using a non-traditional method. Premier FX, a currency company, was used by many to transfer funds prior to its collapse but have not received the sterling value. One victim alone is still missing over £460,000 from the sale of her home in Portugal.