What is the cheapest way to get Euros? If you think you will be making frequent trips to Spain,
or indeed anywhere within Euroland, getting a euro account makes sense. I use Citibank. BBC Radio 4 Moneybox, 5/6/04, said they had no reason to change their opinion
of over a year previously that "frankly it’s still well ahead
of its rivals". They offer a free (subject to
a minimum
average balance across all accounts) euro account if you have a sterling one
with them (although you now -- May 07--have to be careful which account you
choose, as they have started charging for some current accounts). It is very easy to use, and you change money at an extremely
competitive exchange rate. More... Also very good is
Nationwide Flex account. See below.
Recently I have noticed that ATMs give you a choice about whether you want
money debited in euros or sterling - this is similar to the issue raised
below. I have always chosen euros, since I am debiting a
euro account and presumably the Spanish bank will hit me with conversion charges
if I don't; indeed this has worked fine up until now. With some cards the
decision might involve a comparison between the Spanish bank's exchange rate and
your own bank's, something which seems rather difficult...Update: See
Moneybox
20.6.2009 for more - the unequivocal advice seems to be to always choose
euros whether at a cash point or shop or car hire company.
Summer 2007: a number of banks are increasing their charges for overseas use.
See below.
Key facts: The advice was to use your debit card both at
cash machines (ATMs) and in stores; however now the situation is becoming
murkier, and credit cards often look better for purchases. There are two main reasons why using a card overseas might be expensive
relative to the best exchange rate (the retail rate the bank gets). First there
is "loading", typically 2.75% which is subtracted (so the exchange rate you get
is worse than the best one), and in addition there is a bank charge at cash
machines, often around 2%. This is what "commission" usually refers to.
Using your card for purchases also, since recently, probably incurs a fixed charge per transaction each time
you use your card to pay for something. I try to explain this all in more detail
below although this is not fully up to date. (With Citibank and I think Nationwide, you avoid both. See also
www.moneysavingexpert.co.uk which has up to date explanations of these
charges. plus a list of the cards you really want to avoid -- i.e., the usual suspects.)
Remember that "commision free" does not mean much if the exchange rate they
offer is lousy (see below).
If you don't have a Euro account: March 2009: According to Money Box
(7.3.09) charges are going up across most banks previously offering good deals
(see the
transcript, from p.12). Apart from Nationwide (see below) the
remaining "stars" apparently are the Post Office Platinum Mastercard which is
charging zero foreign exchange loading fee both within the EU and worldwide (but
if you take cash out of a machine there is still a charge as it is a credit
card), and also the Saga Platinum Visa card that’s charging zero exchange
loading fee within the EU ( 1% worldwide). I assume there are other
charges though. This programme also said that the Thomas Cook credit card is
going to charge a foreign exchange fee on purchases from abroad from 18th
April 2009, and you also pay an additional cash handling fee of 2.99%.
If you can't be bothered getting a Citibank euro account, an alternative is to get a Nationwide debit card with their 'Flex
account' and get euros out of an ATM when you get to Spain. There are no charges when used to get euros in an ATM nor when used to
make purchases directly with the card. On their website, (06/07) they say they
are still the only high street bank offering this. I used to think this may be as good as using a euro
account, assuming the exchange rate they give you is the same as you would get
from say Citibank, which is how I read their blurb (and it works outside Euroland).
But a colleague has now informed me that he phoned them up (June 07) and
they were offering about €1.41 while the mid-rate was about €1.48, suggesting a
spread of about 10% (i.e., you are effectively being charged around 5%). However
I suspect that this isn't for using your card overseas, probably for buying
euros before you travel; I called them up but they said that the exchange rate
you get when you use your card in an ATM in Spain depends on the bank
(presumably the one that owns the particular ATM), and they couldn't give me any
idea on the buy-sell spread (how close you get to the best rate). So it remains
a mystery, and their website doesn't seem to give any more information, but I
still believe you get a good rate. March 09 update: Nationwide are
going to start charging (0.84%, still pretty low) for using their credit and
debit cards outside of continental Europe: see
this MoneyBox article.
(The transcript is here;
read from page 12.)
(This paragraph may be slightly out of date)
Next best is probably to get a Nationwide credit card, which has no commission
charge (purchases or cash withdrawals) and only a 1% handling fee (min £1) at ATMs
(you do now pay daily interest on cash withdrawals however). Almost as good is
the Liverpool Victoria credit card for which the only charge is 1.5% handling
fee for cash withdrawals (£1.50), and apparently does not charge daily interest
on cash withdrawals. I gather Saga is also good. (The latter two don't
charge the 2.75% commission in Europe.)
Tell me if you know of better deals.
Assuming you don't want to change accounts/credit cards, read on...
According to the Daily Mail (14/7/07) using debit card at an ATM from one of the
5 leading High Street banks to take out £100 worth of euros will cost between
£4.25 and £4.99, and for retail purchases the costs tend to be a little lower.
For credit cards ATM costs vary beween £5.25 and £5.95 while for £100 purchases
it is £2.75-£2.95. In more detail:
The usual advice used to be to use a debit card (i.e., you usual cash withdrawal
card; ) at an ATM (cash machine) when you arrive in Spain. This is supposed to
be cheaper than buying euros at foreign currency outlets in the UK. Most banks
charge a cash advance handling fee - e.g., (2004 data:) HSBC, Barclays, Lloyds charge 1.5% (HSBC
min fee of £1.75, Barclays £1.50 min, £4.50 max, Lloyds min £1.50), Nat West
charge 2.25% (no min, max £4) - plus a "exchange rate
loading" of around 2.75% (e.g., Barclays, HSBC, LloydsTSB), while NatWest
charges 2.65% (see below for some changes in 2007). Thus if you take out £100 worth you will pay around £4.25-£4.50
typically in costs, though on larger amounts you will pay proportionately less
with say Barclays since there is a maximum cash advance fee.
If you use your debit card for purchases, you will normally pay the
loading
(again typically 2.75%; NatWest --Maestro-- charges a 75p fee in addition to its 2.65%) and
not the cash advance fee, but now most banks charge a flat fee of up to
£1.50 (you will usually be asked to
show your passport when paying by card). These costs are relative to a very
competitive exchange rate.
To check whether an ATM accepts your card, look at the symbol on the back of
your card and match it with those on the ATM, but from my experience it's
very unusual to find an ATM which doesn't work.
Lloyds TSB has recently (April 05) increased its charges (though it has introduced a
cap of £4.50 you can pay). As I understand it (from BBC moneybox, 23 Apr
05), you will now have to pay £1 every time you use your card for a purchase
(not ATM withdrawals, but even here the minimum charge has gone up from
£1.50 to £2.00 ), and it seems others have followed suit---see last sentence of
this paragraph. According to moneybox, this makes it no. 2 in the "high charges" stakes. If you
take out £100 in foreign currency from an ATM, you will pay £4.75 (2.75% in the
foreign currency loading + £2 minimum charge). Halifax, IF, RBS, NatWest
or Lloyds TSB debit card all now charge a fee each and every time you use them
for purchases.
The picture is similar with credit cards (I have not updated this data
for a few years). When used at an ATM you will
typically pay 2.75% commission with the big banks (e.g., Barclaycard, NatWest),
plus a charge of around 2% (minimum £2 with Barclaycard), 1.5% with NatWest (min
£2), plus with most you pay interest on the cash from the moment of withdrawal
(even if you pay your credit card bill in full). So in comparison, by using a
debit card at an ATM, you avoid at least the latter. For purchases, costs are
however similar to debit cards. (I did an experiment comparing using my NatWest Access card in a store and it worked out about 2.4% more expensive
than my Citibank euro account card.) Nationwide (world) and Liverpool Victoria
and Saga do not charge this 2.75% commission in Europe.
The advantage with a credit card is that you are supposed to get 100 day
protection against theft/loss/accidental damage if the item cost more than £50.
This is apparently a somewhat grey area when applied to overseas purchases
however, but see this recent
announcement. Check there isn't a surcharge for credit cards.
Summer 2007: According to the Daily Mail (14/7/07) HBOS is increasing its
loading for its credit card from 2.75% to 2.95%, and the cash withdrawal from
2.5% to 3%. Lloyds TSB is increasing its charge on its debit card from 2.75 to
2.99%, NatWest from 2.65% to 2.75% and the 75p purchase charge per transaction
to £1.25.
Buying Euros before you leave: Beware most adverts offering "commission free"
euros, since often their buy/sell spread is enormous, i.e., zero commission on a
rotten exchange rate. (This is to be contrasted with the bank commissions
mentioned above which are based on the market exchange rates.)
My colleague tells me that companies such that Travelex (www.travelex.co.uk) offer good
commission free deals if you
buy in advance online; you can actually pick up your euros at their office at
the airport (I think any UK airport) paying much less than you would if you bought them direct at the
airport (you have to get it through by the morning of the day before you pick
them up). I checked this out (30/06/07) and they were offering a bit over
€1.43, while through my Citibank account I was getting almost 2 cents
more. Ordering through Nationwide gave a worse rate than Travelex, even though
they use Travelx, but they deliver for about £3 I think. You can do the same at
the Post Office (www.postoffice.co.uk) and pick up at a local branch but
on the same day they were offering a little over €1.41, but I don't know if that
is what you get if you turn up without preordering. I also looked at the
excellent moneysavingexpert
site which does a realtime check of rates, and Travelex came out top aside from
a London based operation.
Pre-pay cards such as the Travelex Cash Passport are the latest way to
pay abroad, apparently. They seem to be a bit like travellers' cheques in
a card form, and may be useful if you want to limit spending while abroad. There
is an article from the
BBC's
Moneybox (06/05/2006) discussing the pros and cons, although I get the
impression that they are likely to be less convenient than credit cards or debit
cards and are not a cheap option for getting euros out of cash dispensers. You
load your money on in advance in euros (or dollars) so when you pay for things
there are no additional charges. According to the Sunday Times (15/7/07) both
the Post Office and Travelex hit you twice (on buying and on use) but a new
card, the Caxton FX is better if you manage it online, as you only pay a
€2 ATM withdrawal charge and the exchange rate is good.
Credit card problems: apparently some retailers
immediately convert the value of purchases into pounds rather than charging them
in euros (this happens commonly in Spain, Italy and France); see this
report from BBC's
Moneybox (22/04/2006). You then end up paying at the conversion rate given
by the retailer--typically worse than the one on your credit card (even though
most cards charge 2.75% for conversion to sterling). You are supposed to be
given a choice about whether you want this, but apparently often this doesn't
happen. The practice is known as Dynamic Currency Conversion, or DCC.
The Moneybox advice is that normally it is better to pay in euros and let
your credit card company do the conversion: the lesser of two evils.
Traveller's cheques are usually more expensive than plastic, as you often
pay commission at both 'ends'. They are more useful for remoter destinations
where cards are not accepted.
