Holiday cash

A strong euro means less spending power for Brits abroad

The key thing to remember when buying your holiday currency before you travel is to shop around.

We shopped around and found that there was a big discrepancy between the best rates on offer and the commission charged.

For example, HSBC offered the best euro/pound rate but charged £3 commission, or 2% of the total value. Marks and Spencer have a poorer rate but don't charge commission.

So beware. When you see an advert promising zero commission you might well find that you get a poorer rate. And vice versa.

Cash or card?

But is it better to change your money in this country or use your credit or debit card and withdraw your money once you've arrived at your holiday destination?

There are two things that you need to bear in mind with using credit and debit cards abroad, and they're both to do with fees.

The first fee your card provider will hit you with is for making the cash withdrawl. This is usually around 1.5% for each transaction.

The second is a foreign loading charge which is between 2.5% and 2.75%.

This sounds like a lot of money, but it's worth noting that you pay these charges on the wholesale rate not the tourist rate.

This rate is usually about 5% better so the net result is that you're actually better off taking out money as and when you need it abroad.

When to change?

The euro has recently been gaining ground against both the pound and the dollar. Over the last year the euro has appreciated around 15% against the pound which means travellers to Europe get less for their money.

Steve says "buy your euros now"

So if Europe is your holiday destination this summer, should you buy now or leave it a while and hope that the pound will regain some ground?

Steve Barrow, currency strategist from Bear Stearns, thinks travellers shouldn't hesitate because the situation is only likely to get worse for the pound.

"Anyone looking to holiday in Europe is advised to change currency at an early stage. The pound is currently at 70 to 71p against the euro and I think it's likely to move to 75p," says Steve.

It's a different story if you're travelling to the US though. The relationship between the pound and the dollar has been relatively stable so according to Steve, there's no worry about currency conversion when it comes to holidays in the US.