What does the European debt crisis mean for your holiday money?
The headlines are full of stories surrounding Greece and its possible exit from the European Union, but how will this affect you if you've got a continental holiday booked for this summer? Here we answer the most common questions.
How has the value of the euro changed?
Today (17 May) £200 would buy €230, according to FairFX, which is almost 9% more than a year ago, and the highest level since 2008.
However, Rishi Patel, head of foreign exchange for the company, points out that "it's not just all about the euro and most countries have seen their currencies weaken against the pound, therefore British tourists will find their travel money goes further this year in most countries."
So when should I buy?
Buying euros today would mean you can benefit from the current rate but some experts including James Hickman, managing director for Caxton FX, are predicting that the single currency will continue to depreciate against the sterling. This means if you hang on you're more likely to get more euros for the pound.
I'm off to Greece. Should I be worried?
The truth is no one knows what will happen but the advice across the board is NOT to panic.
Although the headlines may be full of warnings about the end of the euro in the country, nothing is going to happen immediately and even if a new currency comes in, the euro will remain legal tender for some considerable period. "It will mirror what happened when the euro was introduced only in reverse," says Patel.
What do I need to do now?
If the situation in Greece worsens it will cause massive problems for Greek nationals. But it also means those travelling to the country will get a better exchange rate.
A gradual shift back to the drachma is predicted but "no holiday makers or homeowners will be stranded with unusable currency and your euros will be worth a lot so there's no reason to get rid of them," explains James Hickman, managing director for Caxton FX.
So what's the best way to buy euros?
There are plenty of options when it comes to exchanging your holiday money but the most important thing to remember is not to wait until the last minute as bureaux de change at airports and hotels benefit form a lack of competition and, in most cases, offer very poor exchange rates. Instead, shop around for a competitive rate on the high street and online.
Pre-paid cards are also becoming a popular option. You can load them with currency and then spend them as you would a debit card but with no or very few charges. Having a pre-paid card also means you can use it to withdraw cash or spend in a restaurant, regardless of what the local currency is.
As nothing it expected to happen for a while, and a change away from the euro would take time in Greece, it's unlikely you would travel there without knowing what the currency would be.
However, if the euro is pulled and you have a pre-paid euro card, you may not be able to withdraw euros from an ATM. But if this would happen, which is very unlikely, you wouldn't be left stranded as you would be able to withdraw whatever currency was available.
The difference between two currencies; specifically how much one currency is worth relative to each other. For example, if £1 is worth $1.50, converting sterling to US dollars, the exchange rate is 1.5. Converting dollars to sterling at those levels, the exchange rate is 0.66, so $1 is worth 66p. There are a wide variety of factors that influence the exchange rate, such as a country’s interest rates, inflation, and the state of politics and the economy in that country.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.