Years ago, our options were few and travellers’ cheques tended to feature strongly. Today we have so many more ways to pay when we leave Ireland for sunnier climes.
But if the extra choices are welcome, working out the most cost-effective way to amass summer holiday money can be a little trickier.
I was recently flying to London from Dublin Airport when I realised I had no sterling.
Yes, I had cards in my wallet, but it always feels good to have some cash in your pocket when you land. So, without thinking too much, I hastily withdrew £60 from the ATM in Dublin airport and went on my way.
It was only when I was checking my bank statement some weeks later that I realised the cost of the decision: more than €3 for the pleasure of withdrawing sterling.
On top of that, I probably got a poor exchange rate.
What could I have done to minimise the cost of travelling abroad? Here are five tips on how to spend less with your bank and more on your rosé and moules-frites this summer.
1
SHOP AROUND FOR CURRENCY
If you are heading outside the euro zone this summer, minimising the costs of procuring foreign money should be a priority.
Indeed, as the table above shows, it can be worth shopping around, particularly when looking for larger amounts.
The two things you need to be aware of are the exchange rate you are offered, and any commission or charges applied to the transaction.
These can conspire to reduce the amount of cash you end up with.
When it comes to exchange rates, it's no harm to check out the "spot" or wholesale rates beforehand. These can be found on such websites as xe.com and oanda.com. Armed with the numbers, you might be able to get a better deal.
For example, as our table shows, the difference or “spread” between what the spot rate is and what rate you are offered can differ substantially.
Consider the issue of buying dollars. As our table shows, Fexco’s Click and Collect service and No 1 Currency have the lowest spread on wholesale rates, thus offering the most foreign currency to the customer. Worst of the bunch is airport operator ICE FX, which has a spread of more than 5 per cent.
So someone looking to swap €100 into dollars would get $113 at wholesale rates, $111 with Fexco or just $108 with ICE.
Who offers the best value may depend on which currency you want to acquire. On the day of our survey, for example, AIB offered the lowest spread on the Swiss franc. Bear this in mind when shopping around.
The second factor to consider is the amount of commission you will pay on the transaction. While AIB, for example, offers reasonably competitive exchange rates, it also charges commission on the transaction of 1 per cent of euro value of the foreign currency order, with a minimum charge €1.27 and a maximum of €6.35.
On the other hand, ICE says its click- and-collect service is “completely free” off all commission charges.
The flip side is that its FX rates, as we saw, are some of the least competitive around.
So consider both factors before making a decision.
2
GO CONTACTLESS
Since their introduction just a few short years ago, Irish consumers have embraced contactless payments, which allow users to quickly swipe their card on purchases of up to €30. No pins, no waiting for the machine to connect. You just swipe and go. Visa Europe said recently that two contactless transactions with Visa debit cards were being made made every second in Ireland.
Holidaymakers heading abroad this summer should consider going down the contactless route for ice creams, sun hats and buckets and spades. Irish consumers can use their debit or credit cards across the world wherever the contactless symbol is visible at the register, or on the card device itself.
Contactless payments are usually cheaper than paying with a pin, and if you qualify for free banking with your bank, charges shouldn’t apply.
For example, current account customers of AIB will pay no charges on contactless payments with their debit cards within the euro zone until August 26th. Transactions outside the euro zone will incur a currency conversion fee of 1.75 per cent, but there is no minimum charge.
If you are a customer of Bank of Ireland and you spend €30 in a shop in Nice this summer, you will be charged a fee of 1 cent. If you use chip and pin, the charge will be 10 cent, or 25 cent if you withdraw the €30 from an ATM.
Better yet, if you use your BOI credit card for the transaction, either contactless or contact, you will pay no charges.
If you are in Cornwall, on the other hand, a £30 contactless payment will cost you 60 pence sterling (or 68p with a credit card). This is much less attractive than in the euro zone, as Bank of Ireland will also charge you 2 per cent of the transaction value up to a maximum €11.43. This is the same charge as applies for a chip and pin transaction.
Withdrawing money to pay for your transaction is the least attractive, as it has a minimum charge of €3.17.
3
PRE-FUND YOUR CREDIT CARD
Depending on which credit card provider you use, you might find that if you load it up with your holiday money before you go, you will avoid transaction fees when withdrawing cash to pay for dinners out and drinks on the beach.
Bank of Ireland, AIB (except its “be” and click cards) and KBC Bank still offer this service. But what’s the benefit?
Well, if you use a BoI classic credit card that is in credit to withdraw €500 in Spain, you will avoid a charge of 1.5 per cent, or a hefty €7.50.
However, if you want to withdraw cash outside the euro zone, there’s no avoiding a cross-border handling fee even if your credit card is in credit. So, for example, if that €500 was actually £500, you’d be stuck with a charge of 2.25 per cent on the transaction, or £11.25.
4
LIMIT USE OF YOUR ATM CARD OUTSIDE THE EURO ZONE
As my initial example shows, using an ATM card to withdraw money in foreign currencies is not cheap. Minimum charges typically apply, which, combined with potential charges from local ATM providers on top of poor exchange rates, means that you should, where possible, minimise visits to the ATM.
EBS, for example charges up to €6 on ATM withdrawals outside the euro zone, while Ulster Bank’s ATM withdrawal will cost you up to €12. All the others – Permanent TSB, KBC and Bank of Ireland – charge up to €11.43.
If you absolutely must use an ATM outside the euro zone, the best way is to maximise your withdrawals where it is sensible to do so. For example, a Permanent TSB customer withdrawing $350 in the US will pay the maximum charge of €11.43 on the transaction – but the same fee would have applied if they had withdrawn $500 or $1,000.
If you will be travelling outside the euro zone, it might make sense to invest in a so-called currency card. An Post’s PostFX card, for example, operates just like a chip and pin Mastercard. You pre-fund it with your desired currency and amount. You can fund the card in sterling or US, Australian and Canadian dollars.
The card is free and ATM withdrawals are typically cheaper with the card – $2.50 per ATM transaction in the US; £1.50 in the UK; $3.50 in Australia; and $3.25 in Canada, although local ATM charges may also apply. You can also now top it up from anywhere in the world online.
The currency card may fall down as a money-saving option in the currency exchange rates applicable (see table).
Another option is a card such as the one offered by German start-up Revolut. It promises to allow Irish users to convert money (into up to 90 currencies) at market rates with zero commission. It says it makes its money by charging merchants a fee every time its card is used.
To set up an account, download the app and transfer money from your bank account to fund it. For ATM withdrawals and in-store purchases, you can get a Mastercard with the account, but expect to wait about 15 days for it to be delivered.
The card does compare well with the alternatives. ATM withdrawals are free on withdrawals of £500 (or equivalent) each month, after which there is a 2 per cent charge.
Topping up the card in the Single Euro Payments Area is free. Topping it up via a debit card in euro or sterling is also free, although a charge of 3 per cent applies for dollars.
5
REMEMBER: FREE BANKING CAN HELP KEEP COSTS DOWN
If you qualify for free banking with your bank, you should find that costs – at least in the euro zone – can be kept in check.
With Bank of Ireland, for example, euro zone transactions are the same as in Ireland. So if you don’t pay charges on your Irish transactions, you won’t pay them in Italy or Spain either.
Outside the euro zone, however, charges apply whether you qualify for free banking or not – at 2 per cent of the transaction value, on both contact and contactless debit card spend.
Similarly at AIB (where you can avoid all bank charges by keeping a balance of €2,500), if you qualify for maintenance and transaction free banking you won’t pay transaction fees for debit card transactions. But there will be a currency conversion fees when outside the euro zone.
Finally, if you are over a certain age, you might find that your bank will give you commission-free FX. Bank of Ireland, for example, offers commission-free foreign exchange to older customers up to a limit of €2,000.
Still, remember that if you are willing to shop around, you might just find a better deal – commission-free or not.
