What influences exchange rate?

Posted on Dec 11 2019 - 9:00am by Samantha Clark

When it comes to your holiday money, things like inflation, political stability, recession, speculations etc. can affect how much foreign currency you get for your pounds. We talk to Salman Haqqi from money.co.uk to find out how you can get the most from your money when it comes to travelling.

There are a variety of factors that influence a currency exchange rate, many beyond the control of the holidaymaker. However, most travel money providers buy foreign currency at a wholesale price, meaning they can sell the currency to you at a profit. This is why there are so many different exchange rates, so it pays to shop around both online and in store but avoid buying at the airport as their rates are often the worst out there unless ordered in advance for collection.

There are lots of different places you can purchase travel money from, many of which offer different rates, so make sure you do your research before committing.

Shopping online

If you prefer to shop online there are lots of travel money companies which let you order currency online with the option of home delivery or collection.

Shopping in person

If you prefer to shop in person, you can visit travel Bureau de Changes on the high street or at the airport to convert your pound sterling into a foreign currency.

Buying at the airport

Buying at the airport is very similar to buying on the high street, but it is usually much more expensive. If you have to get your travel money at the airport, pre-order it online first to get a better exchange rate.

Accessing local currency at your destination

If you run out of time, don’t worry, you can still access the local currency whilst abroad by using your debit or credit card at a foreign ATM, but this can be quite expensive due to foreign transaction fees.

Cash or card?

foreign currency, exchange rate

Choosing which form of payment to take with you on holiday all depends on your destination, and each form of payment has pros and cons, so a mix of payment options is the safest bet to be fully prepared.

Using cash

Taking cash generally means you will be able to pay everywhere you visit but be wary that high value notes can sometimes be trickier to use. You’ll also have no fees to pay on the items you purchase and it’s easier to manage spending too.

If you do choose to take cash, make sure you budget correctly or you may have to pay larger fees to exchange money whilst abroad. If there is a safe provided by your accommodation then always use it and never take all your money with you out and about at one time.

Using a card

Using your debit card whilst abroad will afford you chip and pin protection, you can easily cancel it if it gets stolen and they can sometimes be free to use. However, many banks do charge you to use your debit card abroad up to almost 3% per transaction and withdrawal.

Credit cards offer the additional benefit of Section 75 which protects credit card transactions between £100 and £30,000 against breach of contract and misrepresentation.

There has been a significant growth in the use of pre-paid cards like Revolut in recent years and these too have their pros and cons. You can use a prepaid card in a similar way to a credit card, except you need to top up the account with funds before you can use them, rather than spending money and paying it off later.

There are two types of prepaid card:

Lots of travel money companies offer prepaid travel money cards online and in store. You just top up the card with pounds sterling and withdraw foreign currency from an ATM abroad. Bear in mind that not all travel money cards are suitable for every type of currency, so make sure to check with the provider before applying.

Standard prepaid cards are designed to be used in the UK but you can still use them abroad for both cash withdrawals and card transactions. You are charged on the rate of exchange each time you use these cards abroad.

Travel prepaid cards, or currency cards, are loaded with a foreign currency instead of sterling, which means you are charged a single exchange rate at the point of topping up the card, rather than every time you use the card.

Prepaid travel cards can be used worldwide, tend to be cheap to use abroad and are a good way of budgeting as you can only use what you top them up with. On the other hand, some cards do charge you for loading the card and some even charge an application and monthly fee.

Finding the best deals

Salman Haqqi from money.co.uk, said: A good deal on travel money means getting the best return for your pounds sterling. You need to find the best exchange rate with the lowest additional charges, like delivery fees, to get a good deal. Compare foreign currency deals online and in store to find which company will give you the most travel money in total.

We hope that you’ve found this piece useful in helping you to get the most from your money. If you’re looking for more travel tips, check out the pieces below.

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