The strength of sterling against the euro means that Brits holidaying on the Continent are seeing their cash go a lot further at the moment.
A year ago, £1 would have bought a fraction over €1.20 but at the time of writing (15th April), the rate is above €1.39. That’s a rise in value of about 15%.
The traveller’s dilemma
The dilemma facing anyone planning to head to the eurozone later in the spring or in the summer is: should I buy my currency now while rates are so favourable?
The pound breached the €1.40 mark in the middle of March – the highest value since 2007 and the start of the credit crunch – and has since slipped back a fraction. Could this be a sign that the euro is strengthening?
If this is in fact the case, it is likely to be a good idea to buy currency now.
But if the ongoing problems with the Greek economy, say, lead to further falls in the euro, travellers might be better off waiting before they exchange their sterling.
Reduce the guesswork
Either approach involves an element of guesswork. Koko Sarkari, chief operating officer of currency exchange firm ICE, says that holidaymakers could consider buying some euros now and the rest closer to their trip.
“It’s a good time to be heading to the eurozone: holidaymakers will find their travel money going further than at any time in almost seven years,” says Sarkari.
“With the General Election on the horizon which may bring currency rate changes, it’s not a bad idea to take advantage of the rates on offer now.”
Sarkari adds: “No one can predict how rates will change, but if you load some money on to a prepaid card in the lead up to a holiday and the euro starts to strengthen closer to the departure date, the rate on the card could work out better than if you had put all your eggs in one basket and bought currency just before your holiday.”
Buying in advance
You are likely to get the best rate on your holiday currency by buying before you set off: the rates offered by airport bureaux de change, for example, tend to be much lower than you can get online or even on the high street.
Online currency services let you order via their sites and then either courier the money to your home or allow you to pick it up from the high street or at an airport, rail station or ferry terminal.
But if you are planning to buy your euros weeks or months ahead of your holiday, you may not want to take the risk of having so much cash sitting at home.
Prepaid cards offer more security
A safer alternative is a prepaid currency card: this is just like a credit or debit card, and can be used to pay in shops and restaurants or to withdraw money from overseas ATMs.
With a prepaid card, funds are loaded on to it in advance so the amount you can spend is predetermined. If you want to lock in to the current exchange rate you need to buy a prepaid card that is denominated in euros or whatever currency is used in your destination – cards are also available in sterling.
When you look for a prepaid card, check what fees you will be charged for opening and using it, as well as whether it offers a competitive exchange rate.
The minimum amount you can put on the card varies among providers. Like debit and credit cards, you will often be charged a flat-rate fee for each ATM withdrawal you make while abroad so it is often more economical to take larger sums out.