You've taken out your insurance, paid for your flight and your apartment and even been organised enough to allocate yourself a holiday budget. All that's left to do now is go abroad and spend the money - and surely that's the easy part?
Not necessarily. While we're all happy to spend hours on the internet or leafing through travel brochures tracking down the cheapest flights and the best accommodation, few of us give as much consideration to the whys and wherefores of procuring our holiday cash. Before you max out your credit card in Barbados or buy a sheaf of travellers' cheques to sew into the lining of your suitcase, it's important to consider the safest and cheapest ways of taking your money abroad.
Credit cards
The big plus with using plastic abroad is its convenience: no need to expend time and effort changing currency or obtaining travellers' cheques. However, many people are unaware of the fact that as well as being subject to the exchange rate on the day of purchase, many credit cards incur a foreign usage charge when used abroad. This is typically 2.75% of the transaction cost and if you withdraw money using a credit or debit card while abroad, your bank is also likely to charge you somewhere between 1.5% and 2% of the amount withdrawn.
If you still intend to use your credit card while travelling, it is therefore worth shopping around to find the cards with the best rates. Nationwide does not charge commission fees on credit card purchases or cash withdrawals abroad, while Saga and Liverpool Victoria both charge 0% in the EU and 1% in countries outside. Once again, the internet banks also tend to offer more competitive rates than their high street counterparts: Cahoot's foreign usage loading is 1.25%, while Egg's is 2%.
Travellers' cheques
Travellers' cheques are regarded as the safest form in which to carry your holiday money, since they can be stopped or replaced within 24 hours if they are lost or stolen. However, security comes at a price: issuers generally charge a fee, and you will be usually be charged commission when you redeem your cheques. It's important, therefore, to keep an eye on commission charges and exchange rates.
High street banks normally charge between 1% and 2% commission on travellers' cheques (Lloyds TSB and Barclay's charge 1.5%; HSBC charges 1% on cheques issued in sterling and 2% on foreign currency), with a minimum charge typically between £2.50 and £4. Once again Nationwide is a good bet: it charges no commission on travellers' cheques and also has a buy-back policy for unused cheques. Halifax is currently running a similar commission-free offer for account holders, but this is in effect only until August 31 of this year. American Express holders can also purchase travellers' cheques (excluding sterling) commission free.
Your choice of destination may determine the currency in which you buy your cheques, but if possible it is often cheaper to buy in sterling as some banks (such as HSBC, above) charge less commission on sterling travellers' cheques, and it is also cheaper for you to cash any remaining cheques on return to the UK. If you are planning a trip to a more remote destination, however, cheques in US dollars are often a more reliable option: it's important to check what is and is not acceptable before you leave.
Currency
Travellers are generally advised against taking all their holiday money abroad in currency due to the obvious security risks: equally, it is sensible to have at least some local currency to hand when you arrive in your destination country for immediate expenses such as transport, food and drink. Again, banks, building societies and travel agents tend to charge commission on the purchase of foreign currency (although Nationwide once more comes up smelling of roses: no commission charged on foreign currency purchases). Instead, pay a visit to your local Post Office: they charge 0% commission for over 20 different foreign currencies.
Buying currency online can also be a provident option. Online FX offers commission free currency with a next day delivery service when orders are placed before 2pm (this carries a £3.95 handling fee). Travelex offers a similar service with a £5 special delivery charge, although in their case you must purchase a minimum of £200 currency (the maximum is £2,000).
Emergency money
No matter how carefully you plan your holiday finances, it is still possible to find yourself abroad with insufficient funds if disaster strikes. Don't panic: there are a number of options open to you.
If you're carrying a credit card but have reached your limit, place a call to your card issuer and explain your situation - they may be prepared to extend your credit limit for the duration of the emergency. Similarly, if you're carrying a debit card but have insufficient funds in your account, call your bank and ask it to arrange a temporary overdraft. If your bank is unwilling to approve either of these options, try calling a (sympathetic) friend or relative and ask them to transfer funds into your account or pay off some of the balance on your credit card.
If you find yourself stranded without plastic, your next option is to call your bank and ask them to send you money to an associate bank via electronic transfer. Again, if you have no money in your account, you can get in touch with someone at home and give them your passport details: they can then ask their bank to transfer money to a bank near you which you can pick up upon identification. However, this process can take up to three days, and is also expensive: with Lloyds TSB, for example, the service costs £6 plus 25p for every £100 pounds sent.
If you require funds immediately, your best option is to wire money via MoneyGram or Western Union. With MoneyGram (1-800-666-3947), transfers are usually completed within 10 minutes and are 100% guaranteed. Sender and recipient are both required to have identification, although a security question can be substituted for the recipient if they don't have identification to hand. The transaction can only be carried out in cash and the sender will have to pay a transaction fee (which varies depending on where you are wiring money to and from). The Western Union operates along similar lines, although it has more agents worldwide and they are willing to accept payments from credit or debit cards.
