The holiday season is in full swing, and those of us fortunate enough to be able to, are packing our bags, braving airport security and jetting off in search of some sunshine, and possibly a beach.
There's lots to think about as a holidaymaker. How much clothing do you pack? How early do you have to get to the airport? Are any liquids less than 100ml?
But there is one topic we often get asked about (particularly at this time of year) and that is, what to do about holiday spending money. Clients ask us where the best places are to buy their currency, whether they should take large amounts of cash abroad and, more recently, whether it's wise or not to use their bank card abroad.
In this modern age of contactless technology and paying on your smartphone, we see more and more people who would prefer the convenience of these options but are concerned about the level of charges they would pay.
Drawbacks to using your bank card abroad
High street banks probably enjoy it when we go abroad as they can charge for the overseas transactions that we make and sometimes these can really add up. Typically, they'll charge a 'non-sterling transaction' fee, which could be around 3% of the value of each transaction.
This would be calculated each time we use our card and is designed to cover the cost of the bank having to calculate and apply the relevant conversion rate applicable at the time, especially given these fluctuate on a daily basis.
They'll probably also have a 'spread' between the rate of which we 'buy' and 'sell' the currency, meaning the overall cost of your purchase could be around 10% higher when you include these transaction costs.
A modern solution
A more recent option available however is to use one of the new 'Challenger' banks. Challenger banks are small, recently created retail banks which are different to the high street banks in that they offer an 'online only' service and do not have branches you can physically visit. You may have heard of Monzo and Revolut, two recent examples of UK Challenger banks. They are both British start-up firms and offer a mobile 'app' which customers can use to keep track of their spending, set budgets, make bank transfers and even change their PIN number.
But how can the Challenger banks help with your holiday spending you may ask? Well, using one of their accounts on holiday can help both make managing your holiday spending easier as well as reduce the amount of charges you pay. Monzo and Revolut for example, do not charge a non-sterling transaction fee nor do they have a spread on the exchange rates they use. They also offer their customers the 'interbank' rate (also known as the 'middle' rate) meaning the rate their customers receive on their debit card transactions is one of the most favourable rates available.
The Challenger banks also allow for cash to be withdrawn at an ATM, also at the 'interbank' rate; perhaps with some restrictions. (E.g. Monzo allow up to £200 per week to be withdrawn in cash).
This isn't to say that cash isn't useful on holiday, especially where a retailer might not accept card payments at all, but the current offerings by the Challenger banks provides holidaymakers with a new and cost-effective option that just might make deciding how to manage holiday spending money that little bit easier.
This article is considered a marketing communication and as such, does not, and should not be taken to include investment advice or a personal recommendation. The views and opinions expressed in this article may differ from those of Pinney Talfourd Wealth Management, it's employees or it's Directors. In writing this article, Pinney Talfourd Wealth Management has not assessed any investment objectives or financial situation in particular. Pinney Talfourd Wealth Management makes no representation and assumes no liability as to the accuracy or completeness of the content of this article, which has been prepared utilising publicly-available information. This article must not be reproduced without consent from Pinney Talfourd Wealth Management.
This article does not recommend one Challenger bank over any other. Monzo and Revolut have been listed purely as examples. Revolut does not have a banking license at the time of writing and is in the process of applying for one.
Pinney Talfourd Wealth Management is an appointed representative of Watson Moore IFA Ltd which is authorised and regulated by the Financial Conduct Authority and registered under FCA number 433008.
Pinney Talfourd Wealth Management Limited
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Registered Office: 54 Station Road, Upminster, Essex, RM14 2TU