As the holiday season approaches (why do us Brits always go away in search of sun when it’s our summer by the way?!) you may be thinking of ordering your foreign currency ready to spend in the destination of your choice.
But did you know that you could actually be paying far more in currency exchange fees by ordering and taking physical cash?
Who carries much physical cash nowadays? I know I certainly don’t.
So why should it be any different when you go abroad? Let me explain how, by using the right debit card with the right bank, can save you a fortune on currency fees.
I was amazed to discover the fees that some holiday makers are paying when using their credit and debit cards abroad.
Foreign Currency Fees
According to FairFX if you choose to pay in pounds rather than the local currency then you could be exposed to extortionate fees and unfair currency conversions.
It’s all because of the Dynamic Currency Conversion (DCC) offered by foreign ATMs, shops and restaurants. It allows them to make an extra DCC charge if you choose to convert the transaction into pounds. On average, this charge is 6% of the transaction but could be as high as 10%!
In 2016, 20% of UK holiday makers chose to convert and pay in pounds spending £380 million in fees!
So you know the situation where you withdraw cash from a cash machine whilst abroad and it asks you whether you would like the transaction to be converted from the local currency (e.g. Euros) to Pounds?
Always choose the local currency!
But it’s not just DCC fees you need to watch out for whilst you are abroad. You may find you are actually paying fees when ordering your currency in the UK before you go.
3 Banks to Consider for Foreign Currency
Let me introduce you to 3 banks that you need to consider using when going abroad.
You can set up a Metro Bank current account on the same day you apply and you will be up and running straight away. They will even print your physical card in branch.
The current account allows you to spend and make unlimited cash withdrawals in most European countries for free.
There is a 2.75% fee on spending in the rest of the world and an extra £1.50 charge for each cash machine withdrawal.
Monzo is a bank that only operates through an app on a smartphone.
You can get set up with a new account within minutes.
Monzo allow you to spend on your card anywhere in the world for free.
You can also withdraw from cash machines up to £200 every 30 days for free. After that the charge is 3% per withdrawal. They say this covers their cost and they actually had a vote in their community of customers before introducing the charge and this was the result.
Revolut is another new bank that only operate through a smartphone.
You can use their card to spend in over 130 countries virtually free. They will charge a mark up of around 1.5% on illiquid currencies like the Russian Ruble and Thai Baht.
One of the great things about Revolut is that you can actually exchange pounds for Euro or Dollars etc in the app in advance and lock in a rate. This allows you to control your spending.
They charge for cash withdrawals over £200 per month at 2%. They can also charge for after hours conversions, 0.5% on most popular currencies and up to 2% on others.
Make sure you no longer pay extra fees to use foreign currency when on holiday. The best way to do this is to use a mobile bank.
Here are 5 reasons why…..
5 Reasons to use a Mobile Bank for Foreign Currency
#1 – Currency is exchanged at the interbank exchange rate
This means you benefit from a currency exchange rate that is used between the banks themselves. No additional fees added.
#2 – You can secure your rate in advance by making a few taps on your phone
With a mobile bank like Revolut you can create your own Euro account and easily switch your pounds straight into Euros. This is really handy if you have been tracking the exchange rate for some time (which you can do on the app) and you now feel the time is right to lock into a rate.
#3 – Easy to top up your account whilst abroad
If your funds are low whilst on holiday, easily switch money in from an alternative account, all via your smartphone.
#4 – Tracking your spending
Most mobile banks will include features that categorise your spending and allow you to track it and set budgets. You can also get alerts if you are close to going over your budget.
This is really handy to make sure you don’t go overdrawn enjoying yourself!
#5 – Freeze and unfreeze your card if lost or stolen
If you lose your card whilst abroad it can be a real pain to have to ring the bank and cancel your card.
With a mobile bank you can just log into your app and freeze the card immediately.
Monzo has a really cool feature within its app where it will literally show you a picture of your card frozen in ice if you decide to freeze it. Then if you find your physical card you can ‘defrost’ your card!
Are you still planning to carry foreign currency cash this summer? I’d love to know why.
Join the conversation here.
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