How to get the best deal on currency exchange
Spending overseas can be a painful affair once the banks apply their exchange rate and banking charges. If you are using debit cards, it is not uncommon for a fixed fee to apply plus a percentage charge which soon adds up.
You can of course use money exchange facilities but this also attracts charges and means you carrying around large sums of money. Call me the queen but I’m not a fan of carrying cash, be it abroad or at home, so this simply doesn’t work for me. Plus, of course, I want every penny I spend to contribute to my airmile balance so I really want to use my credit cards.
So what are my options and how do they each compare?
Here’s a comparison using my recent trip Bahrain as an example as I had the opportunity to do some real-time comparisons whilst I was there and put an exciting new spending option, the Supercard, to the test.
So let’s see how it fares against other currency exchange options.
Overseas spending options
Travelex Pre-paid currency card
It is possible to buy a pre-paid currency card before your trip so you can keep track of your spending. This is only possible for certain currencies and unfortunately one of them is not the Bahraini Dinar. In my example, I would have to buy in Sterling and then apply the exchange rate applicable for each transaction.
Whilst the card applies no overseas payment fees or cash withdrawal fees, it does add a 5.75% fee to the MasterCard exchange rate when converting costs which makes it particularly pricey. The only real benefit I can see of this option is that you have some protection against monies being lost or stolen.
Exchanging money at the airport
This is inevitably going to be the worst deal of all your options for getting your hands on real cash, whether you happen to buy in the UK or at the end destination.
The rate quoted at Manchester airport for Bahrain Dinar on 25/8/16 was 0.4372. This means £500 would buy only 215 Dinar. That’s quite a difference when you see what you can obtain online.
Exchanging money online
Purchasing currency online is definitely better value than buying at the airport, or even in a high street travel agency but it still isn’t your best option. Here’s some example rates for you to see for yourself.
All figures correct as at 22/8/16
None of these rates comes close to the MasterCard or Visa Exchange rate making them a less attractive option. Plus if you change tons of cash and have the money stolen (or lose it), your money is gone forever. Your only recourse is your travel insurance.
Using debit cards abroad
Taking Santander as an example the following charges apply if you use a debit card abroad for purchase
- A non-sterling transaction fee of 2.75% of the value
- Plus a non-sterling purchase fee of £1.25 for each transaction
Wow! If you were to spend £500 you would incur fees of £13.75 plus £1.25 so a total of 3% on that transaction. Obviously the percentage will reduce slightly due to the £1.25 being fixed but I find it pretty annoying being charged £1.25 for every transaction in ADDITION to 2.75%.
It’s even worse if you choose to take money out of your account at the ATM with a:
- Non-sterling transaction fee of 2.75% of the value
- plus a non-sterling cash fee of 1.5% of the value (at least £1.99) being applied
A £500 withdrawal now costs £21.25. Those banks sure know how to catch us unawares. Of course, you also have to factor in the exchange rate which is the daily Visa exchange rate. Admittedly this is slightly higher than what you get if you order money online but of course in that scenario all the charges are factored into the exchange rate given.
Currency Option based on transaction value of £500 Fixed Fees % Fee Exchange Rate Total costs Fees as % of amount ATM Withdrawal (Santander example) £7.50 2.75% 0.4957 £21.25 4.25% Debit card purchase £1.25 2.75% 0.4957 £15.00 3%
Using credit cards abroad
Some cards offer no fees as part of their sales pitch (such as Halifax Clarity) so if you intend to travel frequently these cards may be a good option for you. However they still apply their own exchange rate so you will need to check out how this is calculated. The Halifax card uses the MasterCard exchange rate, the same rate used by Supercard for instance.
If like me, you want to collect airmiles, I have yet to find a card that offers no fees and airmiles combined for mere mortals so usually you have to compromise on something.
Using credit cards abroad can result in expensive fees being applied so here’s some example fees using the Virgin credit card, use of which earns me Virgin Flying Miles. The same fees apply to the Lufthansa Miles and More credit card too.
Credit Card Option based on transaction value of £500 Currency Option Fixed Fees % Fee Exchange Rate Total costs Fees as % of amount Virgin Atlantic MBNA Credit Card ATM Withdrawal £5.00 2.99% 0.4957 £19.95 3.99% Virgin Atlantic MBNA Credit Card Debit card purchase N/A 2.99% 0.4957 £14.95 2.99%
The same rates apply for the Lufthansa Miles and More Credit card but you should check the exact charges for your possible cards.
The new kid on the block
So back to the new kid on the block, the Supercard which I have just started using which so far is looking promising.
The premise behind the card is that wherever you make your transaction, it treats it as though it is made in the UK meaning no international fees. In addition it uses the MasterCard exchange rate.
It links your existing cards to the account so that it is the relevant card that gets debited meaning you still earn those oh so valuable points but without having to suffer the rip off fees.
In the example above, I can link both my Virgin and Miles and More cards to the Supercard, pay using the Supercard thus avoiding the charges shown in the table and still earn those all important miles.
The table below shows you how it compares with the other options.
Comparing exchange rates and fees
Option for obtaining £500 of value Fixed Fees % Fee Exchange Rate Total costs Fees as % of amount Santander cash withdrawal £7.50 2.75% 0.4957 £21.25 4.25% Santander debit card purchase £1.25 2.75% 0.4957 £15.00 3% Virgin Atlantic MBNA Credit Card cash withdrawal £5.00 2.99% 0.4957 £19.95 3.99% Virgin Atlantic MBNA Credit Card purchase N/A 2.99% 0.4957 £14.95 2.99% Supercard ATM Withdrawal N/A 2.99% 0.4960 £14.95 2.99% Supercard purchase N/A N/A 0.4960 Nil 0.00% Travelex Pre-paid currency card cash withdrawal or purchase N/A 5.75% 0.4960 £28.75 5.75%
Looking at all these options, the Supercard offers the best exchange rate and the lowest charges. WINNER!
So how much did I save?
So here is what I saved on my Bahrain trip.
Transaction Date Description BHD Exchange Rate Amount Saving 25/08/16 Regency Hotel 30 0.4961 £60.47 £2.10 26/08/16 Downtown Rotana 50 0.4961 £100.78 £3.26 26/08/16 Regency Hotel 25.047 0.4988 £50.21 £1.81 27/08/16 Starbucks 6 0.4988 £12.03 £0.71 28/08/16 New York Coffee 7.2 0.4955 £14.53 £0.78 28/08/16 Starbucks 6.6 0.4955 £13.32 £0.74 28/08/16 Lanterns Lounge 31.460 0.4959 £63.44 £2.19 29/08/16 Downtown Rotana 21.664 0.4960 £43.68 £1.62 Totals 177.97 £358.46 £13.21
The savings are an indicative figure based on the average foreign transaction fees from six leading UK debit or credit card providers.
Just to further illustrate the potential savings, I used my Miles and More credit card (now attached to the Supercard) on a recent trip to Turkey and here were the charges which applied when I used the card. I have also added in the charge that would have applied had I used the Supercard (annoying!!!) based on the exchange rate applicable on each day.
Transaction Date Description TRL Exchange Rate Non sterling Transaction fee Amount % Of Total Value as Fees Exchange rate applicable on the Supercard Equivalent UK Cost Saving 11/07/2016 AYVALIK TOST 92.00 0.2708 0.74 24.91 2.97% 0.264268 24.31 £1.34 11/07/2016 MAKROMARKET-HURMA 25.25 0.2709 0.2 6.84 2.92% 0.264268 6.67 £0.37 13/07/2016 BUDGET MERKEZ 300.00 0.2646 2.37 79.37 2.99% 0.258542 77.56 £4.18 13/07/2016 GLOBAL GIDA TIC TUR LT 213.85 0.2621 1.67 56.06 2.98% 0.258542 55.29 £2.44 13/07/2016 MOTTO CAFE 84.00 0.2621 0.65 22.02 2.95% 0.258542 21.72 £0.95 14/07/2016 HUDSON DERI SELIM CEMA 70.00 0.2617 0.54 18.32 2.95% 0.255997 17.92 £0.94 14/07/2016 MIGROS SARISU LIMAN 78.61 0.2622 0.61 20.61 2.96% 0.255997 20.12 £1.10 14/07/2016 NEYLA CAFE 55.00 0.2618 0.43 14.4 2.99% 0.255997 14.08 £0.75 15/07/2016 BOZKAN AKARYAKIT-3201 95.00 0.2608 0.74 24.78 2.99% 0.256813 24.40 £1.12 15/07/2016 MOTTO CAFE 142.00 0.2608 1.1 37.04 2.97% 0.256813 36.47 £1.67 Total Deductions 9.05 304.35 298.54 Total deductions (inc fees) 313.4 £298.54 £14.86
As you can see those charges soon add up meaning I paid an extra £14.86 in fees even after I factor in a slightly lower exchange rate on the Supercard.
I also like that the transactions show up nice and clearly on your statement as Supercard — XYZ store. Nothing actually gets charged to the Supercard — the card simply acts as a clearing house for purchases. In effect it’s a little like a financial VPN in that it is indicating to the electronic purchase device that you are in the UK and not some other exotic destination.
In addition the app allows you see exactly what you have saved on each transaction by using the card and is very transparent as it shows the exchange rate used. Here’s an example using one of my transactions.
Individual transaction details
It’s not just for use overseas
It is also worthwhile using the Supercard when you are paying for items in the Uk which are not levied in GBP. For instance, I pay for services for this blog in USD and I am charged a non sterling transaction fee for those too. I would be better using the Supercard to make those purchases!
What do you think?
So it’s safe to say that I truly am finding the Supercard super. It is easy to use and saves me money all whilst allowing me to earn my beloved airmiles. Maybe you have tried it, or something similiar in which case I would love to know what your experience has been.
Pin this so you don’t pay more than you need to exchange money overseas:
Note: this is not a sponsored post but a genuine review of my own experience of using the Supercard.