Getting The Most For Your Pound

[marshbags]

From The Sunday Times, January 11, 2009

Getting the most out of your pound abroad, Beware as banks, bureaux de change and the Post Office cash in

Ali Hussain

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Popular foreign-exchange providers like banks, the Post Office and airport bureaux de change have been increasing profit margins just as travellers suffer some of the worst exchange rates on record.

Many currency providers, including the Post Office and Marks & Spencer, boast they do not charge commission, but they make their money by charging a margin on top of the wholesale exchange rate.

Currency broker Fair FX found the Post Office, where nearly a third of travellers obtain their euros and US dollars, has almost doubled its margin in the past three months from around 2.9% to 5.6%, even though it charges no commission.

That means its mark-up on exchanging £1,000 three months ago has increased from £31 to £56, according to Fair FX.

Lloyds TSB’s in-branch bureau de change has increased margins from about 3.4% to 7%, while Marks & Spencer has raised its mark-up from 3.34% to 5.29%.

The analysis comes as consumers holidaying in Europe this ski season face a big increase in costs because of sterling’s slide. Over the past 12 months, holidaymakers’ spending power in the eurozone has fallen about 24% while travellers to America have seen their pound buy 26% less.

However, sterling has rallied so far this year as traders bet that Europe’s woes could be even worse than our own. Marc Cogliatti at the foreign-exchange specialist HiFX said: “The transition into a new year has opened up the debate as to whether the pound is now too cheap or whether we will see further weakness in 2009. For the time being the market seems to agree that sterling is undervalued.”

Despite this, holidaymakers are still being squeezed. It has emerged, for example, that some credit-card providers increased foreign loading fees — charged when a debit or credit card is used abroad — just before the Christmas holidays. Fees on the Citi, Shell, Easyjet and American Airlines credit cards increased from 2.75% to 2.95% at the start of last month, according to analysts at Defaqto. The change affects new and existing customers.

HSBC increased its foreign loading fee from 2.75% to 2.99% for new customers from December 23. Existing customers will have until March before fees rise. Most currency providers set rates at a point in the day so have to cover themselves for daily interbank-rate fluctuations.

The Post Office would not reveal the exact time it pegs its rates to the interbank rate, saying the information was “commercially sensitive”. It argues it is therefore impossible for Fair FX to work out its exact margin. It said: “As the UK’s largest travel-money provider, the Post Office reviews the exchange rates that it offers customers daily, to ensure we can continue to provide them with a highly competitive deal.”

M&S, Travelex and Lloyds also said their margins fluctuated daily and disputed Fair FX’s findings, although they declined to provide details of their mark-ups.

Here we offer some tips to get the best deal on your holiday cash.

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For overseas use the cheapest debit card is offered by Nationwide, which charges no foreign loading fee or margin on currency conversion. There is also no charge for withdrawing cash.

If you’re using a Nationwide credit card, however, you will be charged a cash advance fee of 2.5% or a minimum of £3. This is also applicable in Britain.

You will need to open a Nationwide bank account to benefit, and some readers have reported problems using their cards in far-flung destinations. A good option is the Post Office credit card which charges no commission, but charges a cash-advance fee of 2.5% or a minimum £3 if you withdraw at a foreign ATM.

Currency specialists such as Caxton FX and Fair FX allow you to load a card with dollars or euros before you travel so there is no conversion or loading fee when you make purchases with the card.

The firms say they change their rates in line with daily movements in the interbank rate, keeping margins at about 1%. They say this allows them to offer some of the best rates available today.

Nationwide’s exchange rate, on the other hand, is based on the Visa wholesale rate which is pegged against the interbank rate at a certain point in the day.

Visa does not charge a commission but as the rate is fixed daily, while the interbank rate fluctuates, the rates offered by specialists can sometimes be better. On Wednesday, the cost of ¤1,000 using the Nationwide credit or debit card was £934 — £12 more than it would have been with Fair FX. You will, however, be charged for withdrawing cash abroad, though this is still less than with most " credit cards ".

Fair FX charges €1.50 per withdrawal in Europe and $2 in America, taking the cost of €1,000 to just over £935. You may also be charged by the local ATM provider.

If you want to take cash, book online.

If you prefer to pick up your cash before travelling, it’s better to plan ahead. Travelex allows you to buy at a bureau de change in airports and seaports but rates are usually poor and you pay commission of about 1.5% with a minimum of £3.

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You can get a better rate by ordering the money online and then picking it up at the bureau. There is also no commission on these orders.

Picking up €1,000 at a Heathrow Travelex would have cost £972, or £36 more than if you had ordered it online and collected it, according to the comparison website, Moneysupermarket.

You can pick up your cash on the same day if you order before 2pm.

Is it worth waiting for sterling to rise?

Though you can order in advance — up to 60 days with Travelex — and lock in a rate, many experts predict the pound will pick up this year. Bob Munro, senior currency strategist at HiFX said: “There is a strong argument to suggest sterling is now becoming chronically undervalued.”

Unquote

Ref url:- http://www.timesonline.co.uk/tol/money/con...et=0&page=1

marshbags

P.S.

Thanks to advice and information from members on another related thread that i cannot seem to locate, i used my Flexi card for the first time since opening my acc. some years ago to check i could actually use it in Thailand. ( I could and did for a few thousand baht at whatever rate )

I got an over the quoted rate given at the Kasikorm bank and no problems what so ever...............Thanks again for the detailed tutorial.

I also asked about over the counter transfer of 250,000 baht via my card, but have had to contact head office as the local branch wasn,t aware of it being permissable.

No problem as i,ll bell them today for advice / information ect.

I,ll also wait to see if the rates improve as i have over a month before i need to top my 800k up with it, plus some extra for emergencies.

Edited January 15, 2009 by marshbags

[dominator]

I use a Bank Of Scotland debit card, no charges either, same deal as Nationwide.

[Mali1964]

Just hope Nationwide don't change their policy on foreign debit card transactions.

Thay save UK users a small fortune every year.

Lets hope they too don't get greedy.

[briley]

Dominator - don't want to upset you but:

<quote>

When you use your card to make a purchase in a foreign currency or withdraw cash using a foreign cash machine, the transaction amount will be changed to pounds sterling on the date we take it out of your account. This may not be the same date as the transaction is carried out. We will select the appropriate exchange rate which will always be reasonable one, then include a conversion fee of 2.75% of the total amount of the transaction. We also deduct a service charge of £1.50 out of your account immediately for each transaction.

</quote>

from the bottom of this page:

http://www.bankofscotlandhalifax.co.uk/ban...ountcharges.asp

Hope I'm wrong in your case.

[marshbags]

Managed to locate the thread i referred to, if anyone wishes to scroll through it.

http://www.thaivisa.com/forum/Blocked-Cash...33#entry2455433

Thanks Steve2UK for giving me the more detailed information and encouraging me to break my ATM duck.

marshbags