Last update:
12-Dec-99

Getting your dollars

Banknotes, Traveller's Cheques or Credit Cards?
Deciding on whether you should get cash or traveller's cheques, and how much of each, depends so much on what you're going to be doing. And don't forget, you'll be able to use your credit card just about everywhere.

There are two things to take into account when working out how much it's going to cost. The exchange rate, which itself varies slightly depending on how you're spending the money, and any fees or commission charges. These charges can vary from nothing (some companies, like my credit card company, offer no-commission, no-fee foreign currency), to 3 or 4%.

In 1999, the official (bank) exchange rate was approximately $1.62 to the pound, and these are the actual rates that I got:

       Banknotes       $1.585 + no fee
       Trav Cheques    $1.588 + no fee
       Credit Card     $1.579 + no fee
       ATM Cash        $1.488 + 2% fee

These figures show that the tourist rates are always a few points lower than the rate quoted on the financial news, but should be fairly close to the tourist rate quoted on teletext, for instance. Also, I was lucky in that my credit card company offers no-fee and no-commission currency (although you do have to pay for registered delivery) - 2% commission, with a minimum of perhaps £3 is not unusual, but no-commission deals are getting more common.

The ATM cash option, using a Maestro or Cirrus card (which many bank cash cards now are), is very useful if you run out of cash even if it is a little more expensive. It is definitely worth checking with your bank and credit card companies to see what they can do for you, and how much they'll charge, before you go. But bear in mind that you may pay a fee for the use of the ATM as well as whatever your own bank charges for the cash advance.

How important is exchange rate?
The American dollar is a commodity that gets bought and sold like any other market commodity, and the result is that its value fluctuates on a daily basis. This fluctuation can have an effect on the cost of a holiday, and many people are concerned to buy their currency and travellers' cheques at the most advantageous rate.

If you're going to be buying $700 of currency and travellers' cheques, and the tourist rate is $1.60, a single cent fall in the dollar's value to $1.59 will cost you £2.75 more, whereas a rise to $1.61 will save you £2.72 - not a huge amount.

Also, remember that travel companies have to make estimates of what the rates are doing when they price their holidays. When the rates are fairly stable, then it makes it much easier for them to fix a lower price - with unstable rates, prices have to be pitched to absorb any increases. During very unstable periods, holiday companies have to insist on currency surcharge clauses in their contracts just so that they can be sure of recouping any losses.

For instance if a holiday company had booked you a $500 summer hotel deal in January 1981, and you'd paid them £207 (exchange rate was $2.42), imagine how unhappy they would be to be presented with the $500 account in August at a rate of $1.77 and a cost of £282.

News services, teletext and various Internet sites provide daily reports of the current £/$ rate, although this is the market rate. The tourist rate is a couple of cents lower. There's a historical look at the exchange rate in the Encyclopedia section.