As the pound hits a record low against the euro, people who have booked
holidays on the Continent will need to stretch their finances farther than
ever. Here are some top tips on how to make the most of your money in Europe
this summer.
Cut-price currency
When it comes to buying your euros, it pays to be organised. Never leave it to
the last minute and buy your currency from the airport, as these bureaux
often charge commission and offer the least competitive deals.
Most high street and online currency providers do not charge commission.
Instead, they make money from the exchange rates they offer. The most
important thing, therefore, is to compare rates.
Marks & Spencer and the Post Office are consistently competitive on the
high street, and a recent survey by Which?, the consumer group, found that
Chequepoint, Saga and Travelex were also among the cheapest places to buy
your euros.
The most expensive places, besides airports, are travel agents. Thomson, Going
Places and First Choice were among the most expensive, according to the
Which? survey.
At the time of writing, £100 would buy €120.87 at M&S or
€121.03 at the Post Office. The best deal was online with Travelex.co.uk, at
€122.21.
However, be aware that if you buy currency with a credit card or certain debit
cards, you will be charged a cash transaction fee, which could eliminate any
savings made.
Barclays, Lloyds TSB, Alliance & Leicester and Abbey, who issue their
customers with Visa debit cards, take between 1.5 per cent and 2 per cent in
fees when these cards are used at a UK foreign currency exchange. If you
were planning to pay for currency with one of these cards, or a credit card,
buy with cash if possible.
Use the right card
You don't want to be carrying around pocketfuls of euros, so ensure that you
carry the right plastic while you are away. Most cards charge an array of
fees when used abroad. As much as £6 in every £100 spent on credit cards
overseas, and £5 on debit cards, goes to banks in charges. All credit cards
charge a foreign usage fee of about 2.75 per cent of any transaction, except
for cards from Nationwide, the Post Office and Abbey.
Debit cards have more complex fees. Apart from Nationwide, all debit cards
charge a “cash conversion fee” of about 2.75 per cent for withdrawing cash,
as well as a “cash transaction charge” of about 2 per cent. Withdraw £100
from a cash machine in Europe with an Alliance & Leicester card, for
example, and you will pay £4.95 in fees.
When you pay for purchases in shops or restaurants, you will be charged a
“retail conversion charge” of about 2.75 per cent, as well as a “retail
transaction charge” of about £1.25. So if you spent £100 on a Halifax debit
card, you would be charged an additional £4.25. Michelle Slade, of
Moneyfacts.co.uk, the comparison website, says: “Nationwide is the only
provider that does not make any additional charges - so it may be worth
opening an account, even if it is only for use when you are abroad.
Watch out for rip-offs
Hotels, restaurants and retailers have found a way to fleece holidaymakers
using cards abroad with a scam known as dynamic currency conversion. When
you pay by card, you should be given the option of paying a bill in the
local currency or in pounds. The hotel, shop or restaurant should inform the
cardholder verbally of the payment choice before the transaction. However,
many do not, converting your bill automatically into sterling at their own
uncompetitive conversion rate, plus commission of up to 4 per cent. Always
ask to be charged in the local currency to avoid the fee.
Buy standalone insurance
Travel insurance sold alongside a holiday by travel agents, tour operators and
airlines is unregulated and can be overpriced and riddled with exclusions.
Thankfully, the Financial Services Authority (FSA), the City watchdog, is
stepping in to regulate these sales from next January. Until then, consumers
need to be extra vigilant when buying travel insurance.
Peter Gerrard, of Moneysupermarket.com, another comparison site, says: “Some
travel agents have been known to add on insurance policies at the time of
booking without checking the customer's eligibility. This has led to people
buying totally inappropriate cover, resulting in a claim being refused.
Insurance sold with a holiday can be three times more costly than a
standalone policy, so holidaymakers should shop around for the right cover
at the right price.”
Your policy should cover medical expenses, lost or stolen baggage and
cancellation - so make sure that you buy it as soon as you book your
holiday. If you make more than two or three trips a year, it may work out
cheaper to buy an annual policy. Martyn Hocking, of Which? Money, says:
“Best buys for travel cover include travelinsuranceweb.com and
TravelPlanDirectinsurance.com.”
When buying your insurance, be sure to declare all relevant information,
including pre-existing medical conditions, and check the cover limits and
excess charges - some can be as much as £100 for every section of the policy
you claim against.
Many people mistakenly think that a European Health Insurance Card (EHIC) is
enough insurance for a European holiday. In fact, you should take out
insurance to cover medical expenses as well. Mr Hocking says: “An EHIC
entitles you to some free or low-cost medical cover in many European
countries, but it won't usually cover more serious treatment.”
You can obtain an EHIC at ehic.org.uk, or call 0845 6062030. Your card will be
delivered in 21 days.
Keep mobile costs in check
It is easy to rack up an extortionate mobile phone bill while abroad, so it is
worth investigating other means of paying for your calls if you plan to
phone home frequently.
Most networks now offer “travel bundles”, which are worth buying if you will
make a lot of calls or send numerous texts. Orange, for example, offers 75
texts to be used in Europe within 30 days for £15. As text messages in
Europe would normally cost 30p each, this could save you £7.50. Call
customer services from your mobile phone to see if your provider can offer
any deals, or refer to its website.
Drivers beware of false economy
Holidaymakers who plan to drive to Europe this summer are being advised to
check their insurance and breakdown policies carefully. More than a third of
drivers are unaware that their motor insurance may be downgraded from
comprehensive to third party when driving on the Continent, according to
Moneysupermarket.com, the comparison website.
Barclays, Direct Line, esure and Swiftcover all reduce your existing cover to
third party only in Europe - the minimum level that all insurers must
provide in Europe. Richard Mason, director of insurance at
Moneysupermarket.com, says: “If you normally have comprehensive car
insurance, it will come as a shock if you are with one of those insurers who
will downgrade your cover for driving in Europe.”
UK car insurance policies should provide you with a green card, or
international motor certificate, automatically to prove that you have
third-party cover. But this does not mean that you are covered for damage to
your own vehicle, or for any medical or hospital expenses that you may
incur.
Before you set off, phone your insurer and find out precisely what you are
covered for abroad, and for how long - it may be that you need to extend
your cover. Ashton Berkhauer, of uSwitch.com, another comparison site,
explains: “Very few large insurers will automatically offer more than three
days free comprehensive cover when driving abroad, with the exception of
Ecar and Saga, which both offer 365 days cover a year.
“Depending on the insurer, motorists can expect to pay either a one-off
flat fee to extend their cover or differing amounts, depending on the length
of time required. Barclays, for example, charges a one-off fee of £21.50 to
be covered for an additional 90 days. Admiral, Diamond and Direct Line offer
different rates depending on how many days are required.”
Similarly, your breakdown policy may not offer you the same level of cover if
you are abroad. James Harrison, of Insurancewide.com, says: “If your
breakdown policy does not cover you abroad, you may wish to consider taking
out a separate European breakdown policy. This usually includes repairing
your car at the roadside, the return of your car to the UK if it cannot be
driven and the cost of travelling home if your car is stolen.”
CASE STUDY: Commission-free currency from M&S cash machine
Jacqui Moran, a database analyst from the Wirral, is planning a trip to Spain
in July with her partner Daniel, an independent travel agent, and their two
children.
Ms Moran, pictured with Joshua, 5, and Tabitha, 3, says: “My mother-in-law has
an apartment near Málaga, so we go there fairly often. The weak euro
certainly would not be enough to put us off, but we will need to get as much
out of our euros as possible.”
The flights were booked online and Ms Moran will get her euros from her local
Marks & Spencer store in Chester. The store has a new cash machine that
dispenses euros and dollars at the same commission-free rate as its bureau
de change. M&S does not charge a fee, but credit cards and Visa debit
cards may.
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