Sort out all your currency needs before you jet off
EXCITEMENT about the World Cup is starting to reach fever pitch and many football fans are heading to South Africa either with tickets in hand or simply to soak up the atmosphere. England fans are expected to spend around £135m during the World Cup, according to a recent study by accountants Grant Thornton.
However, restrictions in place mean that tourists will only be able to take up to 5,000 rand (about £450) in and out of the country and they will therefore have to resort to withdrawing money from cash machines and suffer punitive fees and commissions. Research by Santander shows that almost half of British travellers withdraw three quarters of their spend using an ATM machine while they are abroad, equivalent to £2,025 for the typical World Cup tourist.
But for those who plan ahead, wherever they might be going, there are some clever ways to avoid being stung by card fees and overly wide spreads at bureaux de change.
Currency pre-pay cards are a relatively new and increasingly popular way for tourists to manage their money overseas. The concept is simple: you load money onto a card – normally a Mastercard, so you don’t have to worry about them not being accepted – before you go and then you use it abroad as you would a debit card in the UK.
Don’t be fooled by rand pre-pay cards launched specifically ahead of the World Cup – these can charge exceedingly expensive conversion rates so check exactly what you are buying.
Most come in two denominations – euro and dollar – although providers such as Caxton FX and FairFX offer global cards, which will be relevant for World Cup fans. With the euro and dollar cards, you load up the card – the minimum is £100 with Caxton – at the rate of time of load. You can also load up while abroad via text, phone or online.
The rate is competitive – Caxton says it has a spread of 1.2 per cent on the euro and dollar cards and 2.5 per cent on its Global Traveller card. In contrast, the effective spread from a bureau de change at Gatwick is in the region of 7 per cent and most credit cards are about 2.75 per cent. Caxton also says it does not charge its clients ATM withdrawal fees. Rival FairFX charges €1.50 or $2 to withdraw cash from an ATM on its euro and dollar cards respectively and has no usage charges. Its Anywhere card has no withdrawal fees but does have a 1.5 per cent usage charge.
BEST RATE
Savvy travellers can pick the moment at which they want to load their euro or dollar cards in order to get the best exchange rate. For example, if you had loaded £1,000 worth of dollars onto your card when it was $2 to the pound, you could still be benefiting from that rate today if you hadn’t spent all $2,000. However, the global cards charge you the spot rate at time of spend. This isn’t as good for budgeting but it does mean you get the market rate plus the usage fee.
But a more competitive exchange rate isn’t the only advantage to a currency pre-pay card, says James Hickman, managing director at Caxton FX. “A lot of people are worried, particularly if they are going to South Africa, about using their credit or debit cards abroad. There’s a very high rate of card fraud overseas and that can be worrying when the card is linked to your bank account,” he says.
But if you would rather link your card to your bank account – while it may not be as secure, you do at least know that you have immediate access to all your funds in case of emergency and it is one less card to carry with you – then there are a number of cards which are more favourable to overseas travellers.
WITHDRAWAL FEES
The Post Office credit card tops the best-buy tables for overseas use – it is one of the few providers not to add commission onto any overseas purchases and it is also waiving the 2.5 per cent cash advance fee when its credit card is used to purchase foreign currency.
The SantanderZero current account has a debit card that doesn’t charge customers overseas withdrawal fees and also doesn’t charge transaction fees. The Nationwide Gold credit card, which was once the king of the overseas credit cards, still has no purchase fees within the European Union, but has a 1 per cent fee for any transactions made outside the EU.
Whether you’re heading to the World Cup next month or simply heading abroad for a holiday, it is definitely financially worth your while to think about how you are going to pay for things rather than just putting everything on your standard credit card.