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Getting the best deal for your holiday cash poses the question – if you are travelling abroad, do you need to take some cash in the local currency to fund day-to-day expenses such as taxi fares and snacks? If so, how do you make sure you get the best deal when you can buy foreign currency from a bank, building society, travel agent, bureau de change, even the supermarket or the Post Office? With a little forward planning and careful consideration of your options, you can squeeze the best deal for your money. The worst thing you can do is leave it until the very last minute and end up changing your currency at the airport. The currency converters there know this is your measure of last resort and charge a premium because you have no other option.

Exchange rates depend on a number of factors, including economic conditions and the level of demand. The foreign exchange company also has to consider its own costs – and profits – when setting its exchange rates.

Currency commission – companies often charge a commission to exchange sterling into a foreign currency. The commission might be a percentage of the transaction or a flat fee, but it should always be included in your cost comparisons. In other words, you need to find the company that offers the best exchange rate at the lowest cost. A number of firms advertise commission-free exchange which can be appealing to the cost-conscious traveller. But don’t be blinded by marketing gimmicks. A company that offers commission-free exchange might not give such a good deal on the exchange rate. You could therefore end up with fewer euros or dollars in your pocket.

More companies these days are happy to arrange a foreign currency exchange over the internet. Online services are convenient, but check out the delivery times and costs. Some firms can arrange next day delivery of the currency but there might be a delivery charge. A number of companies charge for delivery only if you exchange a small amount, say under £500 – and you might be able to avoid the delivery charge completely if you can pick up the currency from a local branch. So be sure to explore all the options.

Remember not to take too much cash abroad as it can easily be lost or stolen. There will also be a cash limit on what you can claim on your travel insurance policy, which means you will be covered only up to a certain amount. For example, if the cash limit is £250 and a thief makes off with your wad of £500, the policy would only pay out £250, minus any excess (which itself could be £50 or £100).

You might not expect to return from your trip with any leftover currency, but you never know. It’s therefore a good idea to find out if the company charges commission to buy back the foreign currency. The exchange rate will also be different, so again it can pay to shop around. Look out, too, for any sales or promotions of foreign currency, particularly during the holiday season. And if you buy from your supermarket, you might be able to earn loyalty points for the transaction.

Cash might be the most convenient way to pay when you’re abroad, but it’s also potentially the least secure. For this, and several other reasons, it’s vital that you have a good travel insurance policy that will cover the full amount of money you’re taking. If you don’t, your lost or stolen cash could be gone for good.

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