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Unless you're smart, holiday cash can cost you dearly

PERSONAL FINANCE: Getting your hands on your money when abroad can be a costly business, so it's best to plan in advance how…

Fiona Reddan's picture
Fiona Reddan
Mon Jun 14 2010 - 01:00

PERSONAL FINANCE:Getting your hands on your money when abroad can be a costly business, so it's best to plan in advance how you're going to access your cash

REMEMBER WHEN going abroad on holiday used to mean going down to your local bank to purchase a wad of travellers’ cheques? It seems so long ago now, and given the improvements in banking services around the globe, those days are gone – which may be just as well given the panic which used to set in everytime we forgot where we put the cheques!

Now, while we have more options, the difficulty is in choosing which works best. While cost is an obvious factor, you should also consider convenience and security. Depending on your location, for example, ATMs or foreign exchange outlets might be in short supply.

If you prefer bringing cash with you, travelling to a Eurozone destination will obviously be straight-forward. Getting foreign exchange however, will prove to be more costly. At AIB, you can expect to pay 1 per cent of the value of the transaction, or a minimum of €1.27/maximum €6.35.

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However, for those of a certain age, either students or those in their “golden years”, many banks, including AIB and Bank of Ireland, offer transaction-free foreign exchange.

You frequently have to order foreign exchange, particularly for currencies other than sterling or dollars, so be sure to give your branch adequate notice. Customers of National Irish Bank should note that as the bank is going “cashless”, services such as foreign exchange will no longer be available in branches.

Another option is to buy your foreign exchange in the airport, in an outlet such as Travelex, or in a specialist outlet when you reach your destination. However, this can prove to be more expensive than buying your currency before you depart in the bank. While many operators will offer 0 per cent commission, they won’t offer you as attractive an exchange rate.

If your plan is to withdraw money with your credit card from a local ATM upon arrival, you should try and pay the least charges. Firstly, fund your credit card account before you depart with an estimate of how much you will need to withdraw on your arrival. This should mean that you will avoid cash advance fees, which can be hefty.

Bank of Ireland for example, normally charges 1.5 per cent of the value of the withdrawal, or a minimum of €2.54 for cash advances on its 2-in-1 card, but waives this fee if the account is in credit, as does AIB on its platinum card.

However, be aware that this is increasingly not the case, so check the small print with your credit card provider before your holiday. For example, AIB’s Click credit card is attractive for most uses, given its relatively low interest rate, or APR, of just 9.5 per cent on purchases. The catch is that whether the account is in credit or not, you will still have to cough up a cash advance fee when making withdrawals using this credit card. So, a withdrawal of €500 will set you back €7.50 as the fee is 1.5 per cent of the value of the transaction, with a minimum of €1.90.

The fee bites harder if you are not visiting a Eurozone country. Within the wider European region, you can expect an additional currency conversion charge of 1.75 per cent, rising to 2.75 per cent for the rest of the world. So, that €500 withdrawal is now costing you €16.25 in Switzerland for example, or €21.25 in the USA.

Other providers which now don’t offer free advances when your credit card account is in credit include Ulster Bank, EBS and MBNA.

And, if you decide not to bother loading up your account before you leave for sunnier climes, given that you may be stuck with the fee either way, be sure to pay off your outstanding debt as soon as you can, as cash withdrawals generally incur a significantly higher interest rate than purchases.

Ulster Bank for example, charges a rate of 22.9 per cent for cash withdrawals, while AIB’s Click card has an APR 23.4 per cent, and Bank of Ireland’s Clear card is not much better at 23.2 per cent.

The best rate is to be found with National Irish Bank’s Gold card, which charges the same APR, of 10.7 per cent, on both purchases and cash withdraawals.

If you’re booking your holiday flights with Ryanair this year, you could consider buying a pre-paid Mastercard, from either the airline or other providers such as Payzone, which will save you €10 per return flight.

Another option for withdrawing money abroad is to bring your Visa Debit or Laser card. Visa Debit cards are becoming increasingly popular in Ireland, offered by both Ulster Bank and Permanent TSB, and have the advantage of being readily accepted at over 1.4 million ATMs and 30 million retail outlets worldwide.

Laser cards on the other hand, are co-branded with Mastercard brands Maestro and Cirrus, and so can be used wherever Mastercard is accepted. While “cash-backs” may be possible when travelling abroad, it will depend on the individual retailer, so don’t rely on this as a method of getting money.

The good news when using your Laser card in Eurozone countries is that it will be charged at the same rate as domestic ATM transactions – so if it’s free in Ireland, it should be free in your destination. Travelling outside the Eurozone however, is a more expensive proposition.

At Bank of Ireland, ATM withdrawals with a Laser card incur a fee of 3.5 per cent, or a minimum of €3.17 up to a maximum of €11.43, including the relevant foreign exchange margin. If using Permanent TSB’s Visa Debit card, you can expect a similar charge.

IF YOU INTEND USING YOUR CREDITcard for purchases when you reach your destination, bear in mind that your credit card provider will most likely impose a currency conversion fee on top of its foreign exchange transaction if you are outside of the Eurozone. So, a €150 bag will incur a charge of almost €4 from EBS, or over €4 with AIB's Click card.

If using a debit card to pay for a purchase, you will be charged slightly less. At National Irish Bank for example, you can expect a 1.75 per cent transaction charge, with a minimum of €0.46 and a maximum of €11.43. So that €150 bag will actually cost €152.60.

For those discinclined to give up on their travellers’ cheques, can you actually purchase these any more? Some banks stopped selling them a long time ago, and others have now followed suit, with the product becoming increasingly anachronistic.

Bank of Ireland for example, stopped selling and encashing travellers cheques as of April 30th, which means that if you have any outstanding cheques, your only option will be to lodge them into your account.

FOREIGN EXCHANGE HOW TO GET CHEAPER HOLIDAY MONEY

  • Try and pre-fund your credit card before heading off. You could save €7.50 on a €500 ATM withdrawal – but check first to see whether your provider will still impose a fee.
  • Don't be swayed by foreign exchange outlets offering 0 per cent commission – check their exchange rates before buying.
  • Using your Laser/Visa Debit card for purchases is cheaper than a credit card when travelling outside the Eurozone.
  • If travelling outside the Eurozone do the maths before buying – the iPhone app "Traveler" will convert up to 200 currencies.
  • Don't forget to pay off your credit card debt for cash withdrawals when you come home or you could be stuck paying more than twice the normal interest rate.