Article
Are you travellin' light?
Too many holidaymakers fail to get the best rates of exchange when they go abroad. So Mary O'Hara and Juliet Shedden went in search of the best deals for visitors to euroland
Every year holidaymakers eagerly search out bargain package deals or flights over the net, yet when it comes to changing their money they are all too frequently paying over the odds.
An exclusive survey this week by Jobs & Money of banks, travel agents and bureaux de change reveals big disparities between the best and worst travel money rates and how some bank customers are unwittingly paying total fees as high as 6% when withdrawing cash from a foreign ATM.
A NatWest customer taking out €200 from an ATM in Paris this week will later find that £147 is debited from their account. Yet a customer of Nationwide building society using the same ATM and taking out the same number of euros would be charged just £139 - or £8 less than the NatWest card holder paid.
To make sense out of the bewildering landscape of fees, charges, commissions and penalties in the world of travel money we asked the banks, building societies and bureaux just one simple question - how many euros would a punter walk away with in their pockets after asking to exchange £200 in cash. The results are listed here.
We also asked each bank how much €200 in euros from a Paris ATM would cost their customers. The results are listed here.
The research reveals that the big banks, probably the most popular and convenient location for changing money, are guilty of charging more for euros than a bureau de change at airports and ferry ports which are traditionally believed to be most expensive. However, Lloyds TSB stood aside from the rest of the "big four" by offering generally better rates.
Another favourite, Thomas Cook, also scored badly, although in general travel agents were not as bad for exchange rates as their poor reputation for travel insurance might suggest.
It is also worth noting that Halifax and Abbey National both offered rates far better than the big four banks and that while Nationwide was top for ATM withdrawals, it performed less well when exchanging cash in the branches.
Top prize goes to the Leeds & Holbeck building society, where our researchers were offered €280 in return for £200. But not all building societies offer top value. The worst offer we received was for €267, from the Newcastle building society.
Walk down any high street and it would not be out of the question to find that every bank, travel agent and bureau de change is advertising a different rate of exchange - despite the fact that on any given day they are likely to be buying currency based on near-identical money market rates.
So how should holidaymakers make sure they are making the most of their spending money?
On average, a family of four spends £450 during a two week break, according to the latest government estimates. This means that approximately £17bn worth of holidaymakers' cash will be exchanged for euros and other currencies in a single year. With European resorts as popular as ever the euro accounts for a substantial chunk of the money changing hands, and as it is currently worth around 13% less against the pound than a year ago, it is more important than ever to be shrewd about converting cash.
Even a cursory glance at our table demonstrates the importance of doing your homework on currency exchange. Some banks offer special deals to their own customers and those with a premier, student or graduate bank account can probably get commission-free foreign currency from their bank.
The Royal Bank of Scotland, for example, does not charge commission to customers who have Royalty and Royalty Gold accounts and likewise NatWest offers commission free transactions to Advantage and Advantage Gold account holders.
But for basic account holders, HSBC, NatWest, Barclays and Royal Bank of Scotland were all firmly towards the bottom of the our survey.
Our tables include an "effective charge" figure. This is the percentage difference between the rate offered to a holidaymaker and the euro/pound rate in the money markets on the day we carried out our research. Of course, no one will be offered a zero percentage rate, as there will always be some transaction costs, but it is a useful yardstick for measuring relative costs.
For £200 in cash, Barclays and HSBC will give you €270 with NatWest upping this by 22p while Royal Bank of Scotland will hand over €271.50. A spokesman for HSBC says: "We measure our pricing against a number of other travel money providers on a daily basis and we know that our competitiveness in this market can fluctuate from day to day. We are reviewing our pricing at the moment.
"A large number of our customers do not pay commission on foreign currency such as students, graduates and premier customers," he adds.
A Barclays spokesperson says: "We do feel like we offer a competitive product for our customers. Our product is based on much more than just rates, which vary from day to day. We feel we offer our customers a great package where they can order holiday money at any branch or holiday helpline and they can benefit from a 24-hour delivery service to their office, home or any local branch."
But a spokesman for NatWest said the bank was perplexed that it came so low on our survey. He said the bank regularly monitored rates and usually came out towards the top end of the market.
Don't be fooled by what looks like a good exchange rate but which is followed by a series of other charges. For example P&O Ferries charges commission at 2% plus a minimum handling charge of £2.75. These rates apply on its most popular routes between Dover and Calais and Portsmouth to Le Havre and Cherbourg, and make changing small sums particularly expensive.
So how does a relatively small building society, the Leeds & Holbeck, beat all the major players in offering value for money? The society's head of marketing, Tony Burdin, says: "It's absolutely fantastic to be on the top. We source our currency from American Express and it is Amex which sets the exchange rate. But we're not creaming anything off the top. We're doing it completely commission-free with no handling charges. We provide the service through our branch network and we've obviously picked a very good partner in Amex."
But unfortunately you can't wander into any of Leeds & Holbeck's 56 branches to change your holiday money - it is a service open only to existing account holders.
There are, of course, lots of Thomas Cook branches, but they came near bottom in the survey. The company said it was shocked at the results: "We were surprised at these findings, as we work to provide our customers with competitive exchange rates and instant availability nationwide."
When Jobs & Money told Thomas Cook that Leeds & Holbeck were top, it decided to do its own research. "In response to this survey, we contacted a number of Leeds & Holbeck branches. None of these knew their exchange rates, or could provide currency today, and in one case we were helpfully referred to the local Thomas Cook."
There is some solace on the high street however. Abbey National will give you €277 after charges and Halifax likewise while Lloyds TSB offered €275 for £200.
Banks also benefit from each branch having the same rate of exchange and charges. With a bureau de change, both the rate and charges can differ from one site to another.
An outlet of International Currency Exchange at Heathrow for instance, may well be offering a much better deal than its sister outlet at the Eurostar terminal at Waterloo on the same day. This is because the outlets are concessions on sites owned are by other authorities (such as BAA for Heathrow) and their fixed costs vary, according to a spokesman for International Currency Exchange.
There is, of course, more than one way to skin a cat. There are now more ways to access money abroad than ever before. Traditional travellers cheques are expensive but reliable, and credit cards of all hues are plentiful - although these too can have unseen charges when used to make a purchase abroad.
Then there's the option of changing money as you go along at banks or a bureau de change abroad. But this could work out most expensive of all. According to Travelex, which has outlets across the UK, it can be up to 12% more expensive to change sterling to euros in mainland Europe.
But the option growing most rapidly in popularity is simply withdrawing cash from local ATMs abroad. But this can work out either very cheap or very expensive, depending on who you bank with at home.
RBS/NatWest's charges were the worst in our survey. Just five €200 withdrawals will cost £40 more for a NatWest customer than a Nationwide customer. Barclays, HSBC and Abbey National were little better.
A Barclays spokesman says: "Although we weren't the most competitive, it will depend on the rates. We have our set fees we charge our customers which are: cash handling fee of 1.5% and currency conversion fee of 2.75%. But if our customers used a global alliance ATM they would avoid the cash handling fee."
· Additional reporting by Judith Larner