Holidaymakers are set to shed pounds from their wallets on their next trip abroad – owing to a string of currency rip-offs.
Travellers’ budgets will be squeezed most if they swap currency at the airport, spend using bank cards, press the wrong buttons at a foreign cash machine or swap leftover holiday money at the wrong bureau.
The Mail on Sunday explains four currency traps that put the ‘con’ into ‘conversion’.
Rip-off: Psychologists say you’re more likely to press the button on the right. If you do, you’ll be falling for one of the sneakiest holiday money cons
1. PREPARE FOR A RIP-OFF JUST BEFORE TAKE-OFF
Swapping pounds for euros, dollars or pesos is a transaction often left to the last minute. Airport-based foreign exchange bureaux rely on forgetful or time-poor travellers using ‘dead time’ after clearing security to buy holiday money. The poor exchange rate on offer can cost the price of a family meal out.
Andrew Hagger, of financial research company MoneyComms, says: ‘Don’t assume your bank will offer you a good deal. Cheaper options include Debenhams, Asda, Sainsbury’s Bank, Tesco and Post Office online.’
WHAT TO DO: While there is no single best place to buy currency there is one to avoid – and that is the airport. Find the best-value bureau near to where you live or work – or which can deliver for free before your departure date. Consider using websites such as TravelMoneyMax and CompareHolidayMoney.
Hagger adds: ‘Heavily advertised ‘commission free’ deals tend to sting you on the exchange rate. Most top currency providers haven’t charged commission for years – it’s the exchange rate that is key.’
Customers who are late ordering currency can still secure a better rate by using the airport’s online click and collect option, even if there are only a few hours left before take-off.
Order online for a better rate than the walk-up price and select to collect the money airside after passing through security.
2. THE WRONG CARD MEANS OVERSPENDING
Spending overseas with a credit or debit card often means both a poor exchange rate and fees of around 3 per cent each time they are used. Cash withdrawal fees from an ATM are also £1.39 on average for debit and credit cards, on top of conversion fees.
Specialist credit cards or prepaid cards – which are topped-up and converted to different currencies before leaving home – offer superior exchange rates and zero fees when used abroad.
Three separate transactions of €50 abroad on a typical bank card are likely to cost several pounds more than on a prepaid card.
Many prepaid cards now allow customers to hold multiple currencies on one card. They intuitively choose which balance to deduct from when used in different countries.
WHAT TO DO: Apply for a card that does not penalise you abroad, and which offers a competitive exchange rate. These include Halifax Clarity, Barclaycard Platinum Cashback Plus, Tandem and Santander Zero. Prepaid cards to consider include WeSwap, FairFX and Caxton FX.
Alternatively open a travel-friendly account with companies such as Transferwise and Monzo. Their debit cards allow fee-free spending abroad at competitive exchange rates. New applicants will need to leave themselves time to open a new account or receive a new card in the post. Anyone pressed for time can get a Travelex Money Card in-store, along with a PIN code, so it is ready to use straightaway.
Then compare cards after returning home from holiday to see if it is worth switching to a new card for future trips. Visit comparison websites such as MoneySuperMarket to find prepaid cards for travel.
3. CONFUSION AT THE CASHPOINT
Have you ever felt under pressure to withdraw money quickly from an ATM abroad, while a long queue of customers tap their feet behind you? This pressure intensifies when faced with a confusing array of words about currency conversion options. Some overseas cashpoint operators exploit this by inviting customers to convert into ‘home currency’. Sounds tempting but it is rarely a good idea because the exchange rates are poor.
Even worse, if you agree to currency conversion on a pre-loaded travel card, money has effectively been exchanged twice – first when it was loaded on to the card and instantly converted, then a second time when you press the button opting to convert to home currency again.
WHAT TO DO: The aim is to be charged in local currency – euros in Europe and dollars in the United States. Most often the right action will be to hit the button on the left – with the word ‘no’ or the command ‘without conversion’.
Psychologists say people trust a proposed action on the right of a screen, which is why the most expensive option is usually placed there. Similarly, people under pressure to complete their transaction are also more likely to press a positive ‘yes’ command for their currency than a negative ‘no’. So when it comes to cashpoints abroad it is best to resist those natural impulses.
Similar to the cashpoint sting, cafes, shops and hotels might offer a conversion to the familiarity of pounds sterling. It is known as dynamic currency conversion (DCC). Ian Strafford-Taylor, of currency conversion company FairFX, says: ‘Always choose to pay in local currency.’ He adds: ‘If you are billed in pounds, refuse it. Write ‘DCC rejected’ on the receipt and insist on being charged in local currency, which you are entitled to do.’
4. WHAT TO DO WITH LEFTOVER CURRENCY
Million of pounds worth of surplus foreign cash is left sitting in drawers and cupboards of family homes, which is money wasted.
But those who do convert currency back to pounds can be stung by poor rates. Some companies also sell ‘buy-back guarantees’ for up to £5, promising to buy leftover holiday money at the same rate it was sold. But this fee can swallow any benefit from a superior exchange rate if the sum being exchanged is only small.
WHAT TO DO: Before purchasing a buy-back guarantee consider how much cash you are likely to bring home. These guarantees are better value for customers who want to exchange large sums of cash. Relying more on cards than cash for spending will help avoid the buy-back burden upon returning home.
If coming back to the UK with notes of a foreign denomination is unavoidable, visit websites such as CompareHolidayMoney and Money.co.uk for a list of competitive buy back rates. Options currently include high street brand Eurochange and Debenhams. Foreign currency can also be donated to charity. Many Post Office branches have collection boxes for spare change – with money going to the Children in Need charity.
M&S bureaux de change also keep ‘Change4Change’ collection boxes in store. Money is donated to charity Breast Cancer Now.
CHOOSE YOUR MONEY BROKER WISELY IF YOU MOVE ABROAD
Finding a decent exchange rate is not the only concern for anyone buying a property abroad – because their money may not be protected.
If a foreign exchange broker goes bust, customers could lose their funds. Firms that are authorised by the regulator, the Financial Conduct Authority, must segregate customer money from company funds. This means customers are more likely to get their money back if the broker ceases trading.
Other firms may choose to be registered instead, which only means they are based in the UK and their bosses are unlikely to be crooks. Some of these may choose additional methods of protecting money, which they are not legally required to do.
Anyone sending a lot of money overseas should seek an authorised firm. To check the status of a broker, go to register.fca.org.uk.