If you’ve got a holiday coming up soon should you lock-in your holiday money at the current rates, even if they are really low? Here’s how to fix the exchange rate you receive when swapping your travel cash.
The pound has been falling with the odd little recovery since the Brexit vote in 2016, but now – at the time of writing – it’s at risk of dipping to the lowest level against the dollar since 1985. And it could go even further.
But of course it could rally and go the other way. So much depends on whether the UK leaves Europe on the 31st of October, whether there’s a deal or not, whether there’s a general election, and if so, who holds the balance of power. And the uncertainty and volatility will probably carry on for a good while yet.Fixing the exchange rate now
So what can we do about it? Well, not much about the ups and downs – that’s beyond our control. But if you are looking at going away over the next few months, if not later too, then it might be wise to secure some cash now, even at these low rates.
The reason? Getting some dollars, euros or whatever currency you need now ahead of your holiday will give you some certainty as to what things will cost. If you leave it and the pound does continue to fall that could be really expensive.
Here are three ways you can lock in the cost of your holiday now to mitigate any further falls.
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Watch: Andy’s video on fixing the exchange rate on your holiday cash
Get a prepaid card
Though I’m always shouting about fee-free cards such as Tandem and Starling, you can’t lock in a rate with these. Instead you could get a prepaid card.
Now some of these are full of issues, like top-up fees, non-usage charges and being expensive to use in the UK (if you have any money left on them when you get home). Plus many also only convert the currency at the time you make a payment rather than when you top-up.
But there are a handful where you essentially load up the card with the currency you want, and locking in the rate.
WeSwap – free £10 credit
The one I use is WeSwap. This Mastercard lets you load up pounds and then “swap” them to other currencies. You do pay an exchange fee at the time of the swap, but these can work out as good as the best bureau de changes, or better.
There are three fee options. The lowest is 1% for a seven-day swap. But if you wait seven days the rate could drop further. The same goes for the three-day swap. To nail down the rate on the day you swap the fee is 2%.
You can also swap to 17 currencies, including the US dollar, euro, yen, lira and zloty. Once you have the money on the card there are no charges for spending on the card, though it’s only fee-free at ATMs if you withdraw £200 or more. You can also use it in the UK – handy for leftover cash.
As a new user (via this link) you can get £5 for signing up and then another £5 for adding £50 to your account. That’s handy at the best of times, but particularly now with such low rates.
If you’re travelling with a partner or other family member over 18 years old, then there’s a little trick to maximise this sign up bonus. Once you’ve joined you’ll get your own referral code you can share with them, so you’ll also get a tenner for each person who signs up, as will they. Then split your currency over all the cards and you’ll get more free money and the added protection of not having all the cash loaded to one card.
Get a borderless current account
Another option is to open up a new current account with additional “borderless” accounts. So along with your UK account you’ll also get a Euro one, perhaps a dollar one, maybe other countries too. You can then move your money between these accounts as you wish – though of course there is a fee.
Transferwise – multiple currency accounts
I’ve got a Transferwise account which I use for business payments in dollars. You can also have a European, Australian and New Zealand account all connected to a UK one.
Converting money into sterling is really easy within the app, and it’d be the same the other way around. There’s no charge to add pounds to your account, though you do pay to exchange it to another currency. This fee isn’t huge, but it can vary between currencies.
Importantly you also have a debit card which will automatically take payment from the local currency – if there’s money in there.
Starling – Euro account
I love Starling for overseas spending, and if you already have one then it’s worth adding a euro account for free. If you want to lock in euros at the current exchange rate you can simply move the money over for a 0.4% fee. At the moment you can’t currently use the debit card to spend in euros but this feature is due to be added soon.
Get some cash
Another option you can do as well or instead is just to get some cash from a bureau de change. You’ll get the rate shown the moment you swap your money.
However, they all have different rates, as I’ve written about here. So don’t just head to your bank or Post Office. And don’t fall for any sign saying “no commission”. Instead use a tool like Travel Money Max, or if you’ve a local John Lewis see if they have a travel money desk. If it does it’ll be price matching.
Prepay for hotels and more
If you have the option to pay in advance for any hotels, travel, activities or excursions then it could be a good idea to do it now.
Though you might lose some flexibility, it could be worth it to secure the price now.
Check you haven’t already got currency
Finally, have a look with your passport, in your suitcase or where you dump your holiday stuff to see if there are any notes or coins with it. Anything you already have reduces what you need to get now.
How much should you get?
The real question is what can you afford? If you are at the top of your budget with your holiday then exhange as much money as you can to ensure it doesn’t get even more expensive for you.
Personally, I’d hedge my bets and get some cash and prepaid currency now, but then pay with a specialist card at the time. Though it’s hard to see how they can go anywhere but down in the current climate!