Vacationers planning trips abroad this summer could make significant savings by buying their foreign currency now.
With most travel restrictions finally lifted, overseas holiday bookings are skyrocketing.
For those heading to Europe, the good news is that your spending money will now go further than it did a year ago.
But economists have warned that the improvement in the exchange rate may not last, so you might want to seriously consider buying at least a few euros now.
For those heading to Europe for a much-needed break, the good news is that your spending money will now go further than it did a year ago.
And if you think your flashy new currency card is good for spending abroad, keep in mind that buying banknotes in advance can often be more advantageous.
Jack Mitchell, head of travel money at foreign exchange firm FairFX, says: “Most holidaymakers tend to wait two to three weeks before traveling to buy currency with cash.
“If you’re happy with the current rates of the currency you need this summer, you can consider locking in there.”
> Essential reading: How to save money on spending abroad: From the best bank accounts and credit cards, to taking cash
Pound’s peak performance
The UK’s strong economic recovery from the pandemic has boosted the pound’s performance against the euro over the past year.
Last month it hit a five-year high, with £1 worth €1.22. Even today, for every £100 of spending money you buy, you’ll receive €119, which is €4 more than a year ago.
Jonathan Petersen, economist at Capital Economics, says: “The UK economy has generally weathered the pandemic better than Europe, and as a country it is more insulated from the effects of the war in Ukraine.”
However, some economists believe that the fall of the euro could stabilize.
Ima Sammani, analyst at exchange firm Monex Europe, said: “The exchange rate between the pound and the euro is now similar to what it was shortly after the Brexit referendum and it could be as high as possible.”
However, travelers crossing the pond to the United States are not so lucky with the exchange rate.
Yesterday £100 was worth $127, up from $139 a year ago.
Experts say that’s because the United States has had an equally strong economic recovery and is less affected by the war in Ukraine.
Mr Petersen said: “We expect the pound not to strengthen much further against the euro. However, there may be room for dollars, which means buying dollars could be more expensive later this year.
Good deals for sun worshipers
The Post Office has already seen an increase in foreign currency sales as British tourists prepare for a long-awaited holiday.
The Croatian kuna has proven particularly popular, with sales up 137% last month compared to March 2020.
Travelers will also get more for their money, with the pound having risen 4.9% since April 2020.
This means that every £500 is now worth 4,258 kuna compared to 4,060 two years ago. That’s an extra 198 kuna, or £23 on a £500 spend.
Peak? Last month, the pound rose to its highest level in five years against the euro, with 1 pound worth 1.22 euros.
Holidaymakers to Turkey will also do well, with the pound having risen 116% against the lira over the same period.
This means that £500 is now worth 8,280 lira compared to 3,838 lira in April 2020.
That’s an extra 4,442 lire or £268 on a £500 outlay.
Despite the rise in the value of the US dollar, it remains the second most purchased currency by mail, with sales up 85% between January and March.
Meanwhile, sales of Barbados and Jamaican dollars have increased by 107% and 103% since March 2020.
Nick Boden, Head of Travel Money at the Post Office, says: “Our research suggests that pent-up demand is driving many Britons to plan unforgettable holidays to some of the world’s most ambitious destinations.”
Shop for the best deals
Vacationers are increasingly using cards when spending abroad, which you can top up before your trip.
But research conducted for Money Mail by FairFX suggests that cash is often still king – as long as you can find the best rate.
On Monday, John Lewis offered one of the best exchange rates for the euro: €1,000 for £859. The same amount on FairFX’s currency card would cost £868.
However, the card beat the €1,000 purchase from M&S, which sold for £871.
Of six High Street bank debit cards analysed, NatWest had the cheapest offer, with charges for a combination of cash withdrawals and purchases abroad at £24.
However, spending €1,000 abroad would still cost debit cardholders £887, which is £28 more than if they had bought the euros in cash from John Lewis.
Lloyds charged the highest fees of the cards analyzed, amounting to an aggregate cost of £907. But it was still cheaper than the average rate at airport currency exchanges, setting holidaymakers back £997.
Some credit cards charge no fees and may be cheaper. But you may need to pay off your balance in full to avoid charges.
Be prepared: Economists warn that the exchange rate improvement may not last, so you might want to seriously consider buying at least a few euros now
Change taken at check-in
Last Friday, vacationers buying US dollars at the airport would have received an average of 18% less than the market rate, according to FairFX. This equates to £183 less for every £1,000 traded.
Euro rates were a bit better, but still 16% below the market rate, or £156 less for every £1,000. Birmingham Airport’s walk-in fare was particularly punishing, at £1,000 for just €960.
In comparison, your local supermarket may offer a generous fare with your weekly store. Asda has one of the best rates around, every £100 is worth €116. At HSBC, it’s €114.
Asda will also match prices if you can find a better deal within five miles.
However, several currency retailers have collapsed since the start of the pandemic, including department store chain Debenhams and the International Currency Exchange.
Former airport stalwart Moneycorp closed its last red counters at Gatwick earlier this month.
Meanwhile, Sainsbury’s has yet to reopen all of its travel money offices and RBS is not currently selling any foreign currency “due to supply chain limitations”.
How to save money on spending abroad: Best debit and credit cards
Finding the best deals on flights and accommodation is a no-brainer when it comes to vacation money-saving tactics, but we often overlook one area where costs can quickly add up: spending on the stranger.
The holidays are a time when many of us spend more than usual, whether on debit cards, credit cards or cash, but doing so in a foreign currency usually incurs additional charges.
Getting the best debit or credit card for spending abroad could even save you enough on vacation for a dinner out — and that could almost certainly cover a round of drinks or lunch.
Our guide explains the best debit cards and credit cards for holiday spending – and gives tips on how to get a better foreign exchange deal (spoiler alert, don’t change money at the airport).
> Spending Abroad: Best Debit Cards, Credit Cards & Currencies
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