Shop to avoid bank fees and terrible exchange rates

Having just returned from several days in Geneva and then France, I thought I’d see how badly I had been ripped off at the airport when buying Euros as they are accepted in Geneva as well as Swiss Francs.

I used the Travelex kiosk at Gatwick, but the exchange rates were similar to other foreign exchange companies - £100 bought around €1.10, but when selling Euros the rate was about 1.30. This spread is basically their profit margin – the publish exchange rate is currently 1.20 – and this spread is much wider for less popular currencies such as Egyptian pounds, Thai Baht or South African Rands.

The staff at Travelex was kind enough to tell me give him cash rather than paying with my debit card – otherwise my bank would have charged another 3% on top. I was changing £300 into Euros, so I saved £9 simply by using the cash machine next to the kiosk. The Travelex fee was effectively £30, and I would have saved this if I had been prepared and shopped around before getting to the airport.

Lesson 1: Never exchange money at the airport or ferry terminal.

I have now been through my bank statement to see what rate I got at the cash machines in Geneva – I have a Mastercard, although I believe these rates are fairly typical. The exchange rate is not too bad – 1.16, but the bank also charges a “cash advance fee” of £3.76 – so on top of the 3-4% spread they made on the transaction they charged me the additional 3 percent fee. Apparently you can find these details in very small print on the bank charges paperwork.

Lesson 2: If you must use a card abroad pay direct and don’t use cash machines.

Another little-known rip-off is: Usually the retailer’s exchange rate will be even worse than your own card, when making big purchases in overseas shops avoid paying in a different currency denomination and avoid taking cash out of machines in the wall,
Lesson 3: To get the best exchange rates, Do not pay in the local currency with a debit or credit card.

Many companies are now offering travel money cards – these offer some of the best exchange rates and they don’t add a ‘cash advance fee’ or similar load which you can get on your standard credit or debit card and can be safer than cash. These travel money cards shouldn’t be used in the UK or in a different denomination on the card as interest rates are higher than on normal cards, and they generally also charge an extra fee for using cash machines - so use them for direct purchases where possible.

As with all credit cards, you should set up a direct debit to pay off the card every month, but note that some cards charge an extortionate interest rate on cash withdrawals even if paid off in full at the end of the month.

To ensure you get the best exchange rates and avoid excessive bank charges: pre-book your currency when you book your flight so you can collect at the airport, or if you travel regularly get a travel money card.

The following reputable companies offer pre-booked currency which can be delivered to your door in the United Kingdom: Sainsburys, Tesco, The Post Office, Marks and Spencer and Travelex and Debenhams.

The following providers offer currency cards: Fairfx, Breadfx, international currency exchange and Travelex.

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