ON THE BEACH
Holidays may be back on the agenda but keep a check on your travel cash
AS THE lockdown caused by the Covid-19 virus eases, holidays abroad now look a distinct possibility. Yet the cost could work out considerably more than budgeted unless the planning includes the best ways to pay.
Global remittances will exceed US$700bn this year. The associated costs of transmissions across borders can still be slow and expensive.
Mark Carney, in one of his last speeches as Governor of the Bank of England, said payments “should be instantaneous (and) virtually costless”.
Financial technology has certainly helped but, even across the G7, transferring cash can still cost two per cent and far more if a non-advanced economy is involved.
Wherever possible, take some local currency for immediate needs whilst accommodation is found and you settle in.
Local banks are often closed at week-ends and even bureaux de change may not be open on key days, such as yesterday in Madagascar as it celebrated independence from France 60 years ago.
The Post Office carries probably the largest range of currencies with over 60. The selection runs from the Costa Rican colon and Indonesian rupiah to the Qatari royal.
Home delivery incurs a £4.99 charge under £500 plus £1.50 for a Saturday. Click and collect is free.
Ensure some notes are in small denominations. Avoid purchasing at the last minute at airport and port terminals as they advertise ‘commission free’ but the exchange rate will be unfavourable.
In a survey of over 2,000 adults by HSBC and YouGov last year, 58 per cent relied on foreign currency bought ahead of holiday through a travel agency or the Post Office and 22 per cent used a credit or debit card.
If the currency cannot be obtained in advance, perhaps because circulation outside the country is forbidden or nonconvertible – like the Moroccan dirham and Iranian rial – take small US dollars which are effectively a global currency.
Both for sterling and US notes, ensure crisp newly-minted stock as other paper is likely to be rejected.
A prepaid travel card is now widely acceptable. It ensures you know the conversion to sterling and do not have to accept a poor local exchange rate which can apply in popular resorts.
If likely to need more than one foreign currency, obtain a card with a multi-currency facility which can be managed through an app.
Such apps come with practical features such as the ability to top up, freeze an account, view your PIN and transfer money from one currency to another.
Revolut offers one whilst a similar facility is available for cash withdrawals at a foreign ATM through challenger banks like Monzo (maximum £200 monthly without charge) and Starling.
Plastic money abroad is ideal but take two different providers in case shops and restaurants only accept one. Check before leaving on any charges that may arise.
Do not worry about having to apply a PIN to validate a transaction. Earlier this month, Mastercard revealed that 66 per cent of transactions are now contactless. This has been assisted by raising the payment level from £30 to £45.
Contactless technology by debit or credit card is the most popular way to pay in the UK, which is likely to be mirrored in continental Europe, followed by mobile phone and then a device such as a Garmin/Fitbit.
“Fraud on contactless payments are comparatively lower than chip & pin in Europe and that is still declining, so people should feel confident that they are protected,” says Rigo Van den Broeck, senior vice president of Cyber Intelligence Solutions at Mastercard.
Halifax, part of Lloyds, has a helpful online checker reference to see if your credit card application is likely to be accepted.
There is no obligation to apply afterwards and the credit rating is unaffected.
Charges for both commission and cash withdrawal can arise when non-sterling is obtained through a credit card abroad.
This sting can be 2.99 per cent (American Express, Barclaycard except Rewards Visa, Creation, First Direct, HSBC, M&S Bank, Virgin Money) or almost, such as 2.95 per cent (Bank of Scotland, Halifax except Clarity, Lloyds, MBNA, NewDay except aqua Advance, Santander Everyday, TSB).
Avoid such charges by using a credit card which has no such fee: Barclaycard Rewards, Halifax Clarity, Metro (in EU), NewDay aqua Advance, Post Office Travel, Santander (All in One, Zero), Tandem, Tesco (Clubcard Plus).
The facility is also available for existing customers with Nationwide, NatWest, Royal Bank of Scotland and Santander’s World Elite.
According to research by the independent analyst Moneyfacts, all such cards are fee-free except with Spanish-owned Santander which charges £3 monthly for All in One and £7.50 monthly for World Elite.
If a credit card is used and the goods or service not satisfactorily provided, there is a built-in protection if the cost is £100£30,000 under section 75 of the Consumer Credit Act 1974.
Remember that only the prime card holder can claim, not another person on the same account.
Unlike free ATM cash advances here, debit cards usually attract charges – typically 2.99 per cent transaction and £1.50 per occasion – when withdrawing cash abroad.
The complimentary account exceptions are Monzo, Starling and Virgin Money (and its
associated Clydesdale and Yorkshire Bank).
Watch for ‘dynamic currency conversion’ which means higher charges.
This is where an outlet – perhaps a hotel or shop – gives the option of paying in local currency or sterling.
It is so easy to quickly press the ‘yes’ tab, thereby incurring up to four per cent more cost through a poor currency rate. The card user may not realise this option has been applied if the plastic is taken away and the transaction is out of sight.
If a credit needs to be received abroad, perhaps by a relative or friend to fund groceries before arrival, use an overseas money transfer.
The best-known brand is MoneyGram with several services: 10 minutes, overnight, home delivery, into a bank account and also deposits into mobile wallets. As an example, it costs £4.99 to forward £250 to Romania.
If visiting the same country regularly, consider opening a bank account there and in their currency. This has the advantage that cheques can be issued.
The account can be funded by lump sums converted by a high street currency broker who is still likely to give a better rate than a bank for cash or a debit card transaction, supported by such ID as a passport or driving licence.
If money or a card is lost abroad, report immediately to the police and gain a reference number. LV=’s policy covers cash lost up to £300. If using an app, a lost or stolen card can be immediately frozen.
Finally, if some travellers’ cheques are found in a drawer, it is still possible to use them. When launched by Thomas Cook in 1874, they were called circular notes.
The firm’s travel money arm was acquired by Travelex in 2000. It will redeem travellers’ cheques for a five per cent fee.