Holidaymakers are wasting almost £22 million a year buying currency at the last minute at airports, a study shows.
Research by the Post Office revealed that around 1.5 million people are hit with bad exchange rates and high commission fees as they buy their holiday money at airports and train stations.
Birmingham airport offers the worst exchange rates, according to the Post Office, while Manchester, Newcastle and Liverpool airports' bureaux de change also offer lower than average airport rates.
Many holidaymakers also face massive bills from their bank or building society due to the fees on withdrawing money at ATMs abroad.
Fees and charges
Debit cards, such as those from Santander, Halifax, Lloyds and NatWest, typically charge two fees: a flat cash withdrawal fee and a currency exchange fee. NatWest charges 2% for the withdrawal and 2.75% for currency conversion. For a fortnight's holiday with the family, these fees can quickly add up.
According to financial research company Defaqto, the average charge for a £100 cash withdrawal with a debit card from an overseas ATM is £3.96.
However, there are several ways around these fees. Despite Nationwide cutting its offer of free overseas transactions last year, there are still a few debit cards around that don't charge fees.
Metro Bank's personal current account and Norwich and Peterborough's gold current account both have debit cards that don't charge fees for purchases or ATM cash withdrawals overseas.
Use the right debit card
Ewan Edwards, head of current accounts at Norwich and Peterborough, comments: "People need to make the most of their hard-earned cash, and not using the right debit card could make a huge dent in your finances."
Cumberland Building Society's current account offers the same deal, but the account is only available to people living in Cumbria, north Lancashire, south west Scotland or west Northumberland.
Santander's Zero current account also boasts a fee-free debit card for overseas spending, but the account is only available to qualifying Santander mortgage, savings or investment customers.
Meanwhile there are several credit cards that do not levy a foreign exchange fee on overseas purchases, such as the Halifax Clarity credit card, the Metro Bank credit card, the Post Office credit card and the Santander Zero credit card.
Another option is to use a prepaid card, such as those from FairFX and CaxtonFX. These are topped up, either online or by text message, from a linked bank account. The card-holder can then only spend up to the amount they have put on the card.
Caxton offers three cards – US dollar, euro and global traveller – and does not levy any fees on applying for the card, withdrawing money, on purchases or topping up the card.
The Post Office recently launched a prepaid currency card. Sarah Munro, Post Office head of travel money, comments: "A prepaid currency card is a great idea for holidaymakers who are trying to budget carefully or for those people who have holiday homes abroad who travel regularly and sometimes at short notice.
"It allows you to load money in slices when rates are favourable and the value is then locked onto the card until spent abroad. You can even top up when you are abroad, which makes it a valuable fallback for people who under-estimate their expenditure."
This article was written for Money Observer