Weak euro hits holidaymakers hard so plan your cash before you go

With summer holidays fast approaching, it’s time to get your money organised. It may be one of the least exciting aspects of a visit abroad, but a little bit of time and effort invested before you travel, can save you from returning home to unexpected banking and credit card charges.

Getting the best deal is even more important this year, given that those heading to the US or to the UK will find their holiday may be as much as 20 per cent more expensive thanks to the weak euro.

Indeed in mid-May, €100 would give you just £73 or $114 – not very much to enjoy the highlife in either London or New York, particularly when you consider that this time last year, you would have gotten £81 and $137, respectively.

This means that getting the best exchange rate – at the cheapest transaction charges – has become increasingly important. Given that withdrawing €500 in the US with your credit card could cost you as much as €21.25 – and a lot more if your don’t repay the sum with your interest-free period – it’s worth paying some attention to it.

So before you start packing your suncream and flipflops, take a little bit of time considering how you’re going to pay for your baguettes and your cava once you land.

Should I use my debit card abroad?

If you’re travelling to France or Spain, or anywhere in the euro zone this summer, using your Visa or Mastercard debit card to pay for purchases makes a lot of sense. There won’t be any hefty currency conversion charges, you won’t come home to a bill full of ill-advised purchases, and your bank will only charge you the same amount for the purchase as it would at home.

Taking money out of an ATM may be a bit more expensive however, with local banks liable to impose their own charge on the transaction, which could be as much as €3 each time.

If having access to cash is important to you, withdraw a reasonable amount before you travel, and once there, try and limit the number of times you use it. Paying for groceries, dinners out and trips to water parks with your debit card should help you maintain your cash reserves, leaving you plenty to spend on drinks and ice-creams on the beach.

If your voyage is taking you just across the Irish Sea – or further afield – this summer, you will need to be much warier of how much card transactions can cost you in non-euro zone regions.

For example, if you want to settle your restaurant bill with your debit card, AIB will charge you 1.75 per cent of the euro value of your debit card withdrawal, based on a minimum €0.45 up to a maximum €11. This means that a €100 bill will incur a charge of €1.75, while if you're forking out €1,000 on a new set of golf clubs for example, paying with your debit card will cost €17.50 in charges.

ATM withdrawals will cost you even more. AIB levies a fee of up to 2.5 per cent of the euro value of the transaction – and unlike other banks, this isn’t capped.

Commission of 1 per cent of the euro value is also charged (the minimum charge is €2, the maximum, €6). This means that a €500 withdrawal will incur charges of some €17.50. And this is before charges from the local operator are imposed, which means that a transaction may well cost you about €20.

Given the minimum fees that apply – €3 in the case of Ulster Bank for example – as well as local fees which apply each time you use an ATM, it makes sense to maximise the amount you take out and avoid multiple withdrawals.

If you're travelling to the UK and you're an Ulster Bank customer, look out for branches of Natwest, RBS or Easycash, as you can avoid ATM transaction charges by doing so.

What about a credit card? If I pre-fund it

can I avoid charges? It’s an oldie but a goodie, and thankfully, something that many banks still offer

– even in these uncompetitive times. If you pre-fund your credit card before you depart, and keep it in credit while away, you can avoid transaction fees.

Bank of Ireland, KBC Bank, Permanent TSB and AIB (only on its Platinum and student cards) still allow customers to avoid fees by doing this, while Ulster Bank does not.

Its use is limited in the euro zone, where the only charges you may face when using your debit card are those imposed by local ATM operators. But when travelling into a different currency zone, it can help keep your costs in check.

There is one caveat however to the aforementioned pre-funded credit card rule – typically the banks will only defray the cash advance fees, which means that if you’re in a non-euro zone country, cross-border handling fees will still apply.

For example, if you use your credit card to withdraw money in the US, you will incur a charge of 4.25 per cent if you use AIB’s Click Card. This means that a dollar withdrawal worth €500 will incur a charge of €21.25. A slightly lower rate of 3.25 per cent applies within the “Visa Europe” region, ie, Denmark, UK, Turkey and Switzerland.

If, on the other hand, you have a credit card with KBC Bank, and withdraw money worth €500 in the US, you could be faced with charges of €17.50 (3.5 per cent charge). If your card is in credit however, the charge will fall to €10 (2 per cent charge), so significantly cheaper than that available from AIB.

Credit card purchases outside the euro zone will be cheaper than cash withdrawals.

If you use the same AIB card to buy some groceries for example, the charge will be lower, at 2.75 per cent in places like the US, and 1.75 per cent within the Visa Europe zone.

Remember also, if you’re a fan of using your credit card to withdraw money – either at home or abroad – a hefty interest rate is levied if you don’t repay the money within the interest-free period.

For example, Permanent TSB charges a rate of 20.96 per cent on cash withdrawals, compared with 18.4 per cent on purchases.

To decide whether you should use your credit card or debit card when travelling outside the euro zone, take a look at our table to see what your bank is charging you.

What

is dynamic currency conversion?

When using ATMs, or paying for items with a card outside the euro zone you’ll often be asked if you want your transaction converted back to euros, a process known as “dynamic currency conversion”. This means you’ll be charged a fee by the ATM operator or merchant for converting the transaction back to your own currency, and estimates suggest this could be about 3 per cent.

So, unless you really need an on the spot currency conversion, avoid it.

Does it matter if I use Visa or Mastercard?

It’s not just bank charges which matter when travelling abroad – foreign exchange rates do too – and what rate you get with your credit or debit card depends on whether you use a Visa or a Mastercard. If you have both, it may be worth finding out which is offering the better rates before making a purchase.

On May 18th for example, a transaction costing you $100 would have converted to €88.31 with Visa, or €87.71 with Mastercard. So the cheaper deal would have been Mastercard.

What about currency cards?

One way of taking the worry out of exchange rate fluctuations is to buy a currency card.

An Post offers the PostFx card, which operates just like a chip and pin card, but you pre-fund it with your desired currency and your desired amount. You can fund the card in: sterling; US dollars; Australian dollars; and Canadian dollars.

The card can be used at any British, US, Australian or Canadian retail outlet, tourist attraction, restaurant or ATM that displays the Mastercard acceptance mark, although limits do apply to the amount you can load onto it at any one time. The limits are: US$9,000; £5,000; AU$10,000; CA$10,000.

While the card is free and using it to pay for purchases is free, you can expect to incur additional charges for withdrawing money at the ATM. In the US, you’lll pay $2.50 per ATM transaction; £1.50 in the UK; AU$3.50 in Australia; and $CA3.25 in Canada. Local ATM charges may also apply, while there are other charges too.

If you don’t use your card for 12 months for example, a charge of $3.50/£2/AU$4.50/CA$4.00 will be imposed; it has an annual stamp duty fee of €5. Note too that daily limits apply: $800/£500/AU$1,000/CA$1,000, and if you run out of money while abroad, you won’t be able to fund it online, as this has to be done via a post office.

If you don’t use all the money, cash it in when you come home. Avoid using it when you’re back home – a transaction in euro will incur an additional charge of 5.75 per cent when the card is denominated in dollars. And, as with all foreign exchange transactions, you might find a more favourable exchange rate on offer elsewhere, as our table shows.

Remember also, that the An Post card is not the only option. While it’s not available here yet, over the next couple of months Caxton intends to roll out its foreign exchange prepaid card across Ireland. This card will allow you to load it with euro, and change it to any of the other 14 currencies available on the card.

The card, which is already available in the UK, looks more competitive as it does not charge users for ATM withdrawals or purchases abroad, and it is free to acquire. However, as with An Post’s card, foreign exchange rates may be less favourable than those you could get elsewhere.

Finally, a new service is peer-to-peer currency exchange, offered by the London based WeSwap, which raised some $7.5 million in funding last autumn. It allows you to swap in currencies ranging from sterling, to US dollar to Swiss francs and Hong Kong dollars, for what it promises is a very low cost. The currency exchange allows you to swap your euro with someone who is looking to get rid of their sterling, for example. Once your money is swapped, it’s lodged onto a WeSwap prepaid Mastercard, which you receive when you sign up for the service. And if you’re a frequent traveller, up to 16 currencies can be lodged on the card at once. You can expect to pay ATM withdrawal fees of up to about €1.50, and like the An Post card, stamp duty of €5 applies for Irish customers.

It charges fees ranging from 1 per cent, for swaps arranged over a week, to 1.4 per cent for those needed instantly. Exchange rates are at the spot, or mid-market exchange rate, which is typically much more favourable than that which you can get from your local bank.

But I want cash?

If you want cash, it’s worth shopping around before making your move. As our table shows, rates do vary from provider to provider.

It’s also worth looking for free commission foreign exchange services, although remember if you’re being offered a poor rate, this may wipe out any of the gains. If you’re over 66 for example, both AIB and Bank of Ireland (up to €2,000 a year), offer commission free foreign exchange, while you can also get 0 per cent commission at outlets of An Post and ICE in Dublin Airport.

You can also buy notes online. Kerry based Fexco for example, offers a no commission "click and collect" service through 13 Fexco outlets and credit unions across the country.

It will send you an email or text message as soon as your order is ready for collection. Orders normally take two days for collection, but some more exotic currencies can take up to seven days.

If you’re wondering whether you should put off your currency purchase until closer to your travel date, you may not do any better. Currency experts expect the euro to remain weak until the Greece crisis is resolved.