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After two years of lockdowns and travel restrictions, many will be looking at summer 2022 as the opportunity to finally escape and go on the holiday they’ve dreamt of for so long. That said, when it comes to travelling abroad, there’s a lot of factors to consider – one of them being foreign currency.

Perhaps you’re a little rusty when it comes to exchange rates, or maybe it’s the first time you’re leaving the country; after all, nearly a quarter of Brits have never been on a plane, and one in ten have never left the UK. Whatever the reason, if you’ve got questions about foreign currency, at The Salary Calculator, we’re here to answer all your burning questions. In this article, we’ll explain:

• How the pound is looking against the euro and the dollar
• Whether you should buy foreign currency in advance and what the risks are
• Top tips for securing the best exchange rate and avoiding charges

The pound versus the euro and the dollar

Exchange rates are in constant fluctuation, and a wide range of factors can affect them. Everything from political stability, interest rates and inflation to public debt, speculation and money supply can make a currency go up or down in value.

When it comes to the GBP/USD rate, over the last five years, it has been as high as $1.4328 and as low as $1.1492. That said, currently, the exchange rate is closer to the top-end of the trading range, and the higher it is, the cheaper it is to buy dollars with pounds.

Meanwhile, the GBP/ EUR rate, in 2021 and the beginning of 2022, has also been trading at the high end of its 5-year trading range.

Buying currency ahead of time: The advantages and risks

In some situations, when buying currency, it can be advantageous to plan ahead of time. In cases where you want to exchange large amounts of money, or you’re looking to purchase a currency that’s slightly more obscure than the euro or dollar where the exchange operator may have to order it in, buying in advance could be a good idea. That said, for ‘exotic currency,’ waiting until you arrive at your destination could be a better idea, as local rates are usually better.

You may also be thinking about buying your currency ahead of time in case the pound weakens. However, it’s important to keep your finger on the pulse when it comes to buying currency and check for updates on the exchange market. This can be done at XE.com, where you’ll be able to access live updates on the pound’s value against other currencies. Starting this research around a month before you’re due to head off is a wise idea. If, for example, you notice a trend of the rate steadily going down, buying then and there could help you get the most from your money. A safer bet, though, is to buy half of your travel money before and half later.

For trips where you’re unlikely to need to use cash, to avoid this altogether, it might be worth using a no foreign transaction fee travel card to pay for your purchases.

Tips for getting the best exchange rate and avoiding charges

There are some dos and don’ts when it comes to exchange rates and foreign currency, and below are some of our top tips.

Don’t buy currency at the airport

This is the number one way you will lose out when buying currency. Airport kiosks offer the worst holiday money exchange rates across the board, and they do this because they’re charging you for the convenience. If you’re up against time, or perhaps your trip is a spur of the moment escape, ordering your currency online and picking it up at the airport will help you avoid terrible exchange rates.

When abroad, pay in the local currency

Once you’ve flown to your holiday destination, make sure, when given the option, you choose to pay for purchases in the local currency. This will allow you to avoid both poor exchange rates and currency conversion fees.

Make sure to shop around

There are lots of foreign currency providers in the UK, so it’s worth comparing rates, even if the difference in exchange rates isn’t huge, you can still save a little.

Avoid using your credit or debit card for purchases abroad

When you use your card abroad, it’s likely your bank will charge you a non-sterling transaction fee (usually around 2-3%). Alongside this, you may be hit with additional fees for withdrawing cash and interest on top of the withdrawal. Some cards  charge between 50p and £1.50 for transactions on top of their normal exchange rate charge. Banks who are the culprits for this include Lloyds, TSB and Halifax.