Here's a cheering thought as your inflation-busting council tax bill hits the doormat: get the brochures, book a holiday and join Britain's biggest-ever spending binge abroad in 2008.
By Jeremy Gates
Here's a cheering thought as your inflation-busting council tax bill hits the doormat: get the brochures, book a holiday and join Britain's biggest-ever spending binge abroad in 2008.
We will splash over £35 billion abroad this year - around 58% of that in the eurozone from 55 million personal visits - against £24 billion in 2000.
Frazer Millar, M&S Travel Money manager, reckons that if each one of the five euro notes which Brits will spend in 2008 was placed on top of each other, the resulting pile would be 2,000 times the height of the Eiffel Tower.
Zut alors! But Paris isn't currently a place for Britons to feel wealthy abroad. A Post Office survey - "What the Pound Buys Abroad" - identifies six long haul destinations where sterling has more spending power in 2008 than 2007.
In South Africa, the pound is 15% stronger than a year ago. It should also go further in Hong Kong, Jamaica, Barbados, St Lucia and the United States, while the exchange rate has stayed constant in Dubai.
Says Helen Warburton, Post Office head of travel: "Currency sales running up to Easter suggest people will hang on to their holidays, despite the credit squeeze.
"Across the board, we sold 20% more currency during March, and while this is explained partly by the timing of Easter and school holidays, it suggests holidays remain a firm priority."
The Post Office points out that as Europe gets dearer for Britons, we buy more and more euros - up 29% in Easter week alone. More of us give Prague a wide berth, following a 31% surge in the value of the Czech koruna against sterling in the past 12 months - the Post Office says British demand for the koruna is down nearly 16%.
In Beijing Olympics year, the Chinese yuan is the latest currency to go "on demand" in 1,400 Post Office branches: walk in and take as many as you like.
Although the Post Office's move into foreign currency in 1993 accelerated the move to commission free dealing - and repurchases of unspent cash after the holiday - the sector offers clearly rich pickings for big players.
According to Stephen Heath at prepaid currency debit card provider FairFX.com, travellers pay as much as 12% more for foreign currency at airports including Luton, Birmingham,, Manchester and Bristol, instead of buying online. He thinks the average profit on currency sold at UK airports is around 7%.
Meanwhile cardholders using 'plastic' abroad, says uSwitch, the independent price comparison and switching service, pay fees of £686 million - £368 million on credit cards and £318 million on debit cards and cash withdrawals.
Card holders face four charges on transactions abroad:
:: Exchange rate loading fee - the average is 2.66% for credit cards and 2.28% on debit cards, added by most credit and debit card companies.
:: Debit card purchase transaction fee: nine debit cards now levy this fee, averaging £1.19.
:: Cash withdrawal fee: usually a percentage of withdrawal, 1.50% on debit cards and 2.67% on credit cards.
:: Dynamic currency conversion: typically 4%, charged when retailers convert transactions into sterling instead of using the local currency. Always ask for local currency to be used to avoid this 4% fee.
Says Mike Naylor, personal finance expert at uSwitch: "Charging a fee for every purchase made overseas on a debit card is a lucrative bandwagon. Debit card holders with a bank levying these charges should think carefully before handing their card over the counter while abroad."
Mr Naylor's advice for keeping costs down is to take some local currency, exchanged free of commission - plus a Nationwide BS debit card which doesn't charge for purchases or cash withdrawals overseas.
Post Office and Nationwide BS credit cards don't charge exchange rate loadings - but do charge for withdrawing cash.
One of our biggest tour operators Thomas Cook, now a FTSE-100 company, wants to double revenues from financial services between 2007 and 2010.
Hence its new Thomas Cook Credit Card, launched in conjunction with Barclays Bank: like the Nationwide BS card, it charges no foreign currency loading fee, and promises a perpetual 0% rate for three months on any spending at Thomas Cook branches, and makes no credit card charge on purchases at Thomas Cook. Interest charges on balances from other spending are 17.9%.
On foreign exchange, the card doesn't levy the cash advance fee which begins ticking when you get cash on many other cards. It also awards Thomas Cook 'travel pounds' - at the rate of 1% on all spending, and 2% on products purchased through Thomas Cook.
"If you book £2,000 on the holiday and spend £1,000 in resort, you could save £168 by avoiding usual currency charges," says Mark Nancarrow, a former Egg bank boss hired by Thomas Cook to beef up its financial services arm.
However M&S Money cardholders in the M&S Travel Club can get up to 10% off a Thomas Cook holiday, 0% interest for six months on any purchases with a new card and also collect points which buy vouchers in M&S stores.
The M&S Money card, however, does levy a foreign currency loading fee - and has no plans at present to change this.
Says Frazer Millar at M&S Money: "Saving money on foreign currency is horses for courses. Don't use a credit card to get cash from a hole in the wall abroad, because you are clobbered with a foreign loading fee, cash advance fee, and a higher interest rate than you pay on retail purchases.
"On meals in restaurants, credit cards make sense - providing you pay off the balance without incurring interest charges. The only risk is dynamic currency conversion- and, possibly, getting your card skimmed."
Given the complexity of charges facing card users, and high charges on foreign currency at airports, it is hardly surprising that the choice of prepaid cards is expanding fast: leading suppliers including the Post OfficeVISA, CaxtonFX, FairFX and Club 18-30.
The prepaid card, useful in controlling the spending of students on gap year travels by allowing regular top-ups by cash, bank transfer or credit card and in convenience stores with Payzone and Paypoint chains, avoids interest charges, late fees and balance transfer fees.
There is usually an application fee for the prepaid card in the first place and there may be a fee when it is used for ATM withdrawals.
Says Stephen Heath at FairFX.com, a chip and pin enabled prepaid debit card: "Prepaid cards are a cost-effective and secure way to take money abroad, but the key thing is to check their conversion rates to the pound.
"Our card, totally online and fully automated, offers rates for Euros and US dollars at less than a 1% margin above wholesale rates - and at cashpoint machines, we make only the charge imposed by Mastercard."
Before travellers depart, they need to know how tops-ups will be permitted on each card. Some only allow top ups face-to-face, others by internet and 'phone.
:: INFORMATION: Post Office currently promises special rates for customers spending £500 or more on foreign currency (0845 850 0900); M&S Travel Money (0800 363 484) and over 100 in-store bureaux de change; www.uSwitch.com (0800 093 0607); Thomas Cook Credit Cards available in any Thomas Cook store and online at www.thomascookcreditcard.com.
Prepaid cards suppliers include Post Office (08457 223 344 and www.postoffice.co.uk); Caxton FX (www.caxtonfxcard.com) launched its prepaid Dollar Card in January; FairFX.com (www.fairfx.com).
POUNDNOTES
:: As record sums flood into building societies - their net receipts hit £1.35 billion in February - savers must be alert to get best rates on their cash. Andrew Haggar at Moneyfacts fears disgruntled consumers have seen rates on some accounts fall by more than the cut in base rate, while others just can't be bothered to keep jumping between short-term deals.
For internet accounts, Moneyfacts says the most consistent account over 18 and 36 months is Sainsbury's Bank Internet Saver. For Mini-Cash ISAs, best performers are National Savings & Investments' Direct ISA, while Yorkshire BS is best over 36 months.
Best provider over 18 and 36 months for Notice Savings Accounts (no bonus) is the Anglo-Irish Bank seven day account. The same provider also tops the No Notice Accounts with its easy access deposit account.
:: If stockpickers still want to play the Stock Market, what shares are safest ports in the storm? Nick Raynor at The Share Centre backs National Grid, Pennon, Northumbrian Water, BT, Tesco, BAT, Lloyds TSB, Land Securities (ahead of a three way split supposedly to unlock value), ABF and Reckitt Benckiser.
:: Buying a life policy and paying monthly premiums to collect a lump sum at maturity ties up too much cash for many small investors. Assured Fund is a US-based fund worth £189 million holding 229 policies which is now being marketed through IFAs (financial advisers) in the UK to clients putting in a minimum £10,000.
Assured fund enquiries: 0870 351 2920 and www.policyselection.co.uk.
:: Although banks wrote off £17 billion of bad debt in 2007, some 4.1 million unsecured loans were still handed out last year worth £29.9 billion, and only 21% of borrowers had to give proof of income, says Mike Naylor at uSwitch.com
The price comparison service says lower earners are having a binge alongside high-fliers: about 15% of people earning £10,000- £14,999 a year managed to borrow between £10,000 and £12,499, even though this sum could be more than 100% of their annual salary.
uSwitch says borrowers must get the right loan: an £8,000 loan at 6.9% APR over five years costs £875 less in interest than the same loan at a rate of 10.9% APR.
HIGH FIVE SAVERS:
Phone No Rate Account Period Deposit Interest paid
Icesave www.icesave.co.uk 6.70% (F) Fixed Rate Savings One Year Bond £1,000 OM
Birmingham Midshires 0845 603 2286 6.65% (F) Fixed Rate Bond Six Month Bond (T) £1 OM
Coventry BS 0845 766 5522 6.45% (F) 50 Plus Notice 60 Day (S) £10,000 Yly
Manchester BS 0161 923 8015 6.41% Premier Sixty 60 Day £1,000 Yly
Kaupthing Edge www.kaupthing-edge.co.uk 6.31% Savings None £1,000 Mly
TOP FIVE BORROWERS:
Phone No Rate Period Max% Adv Fee Incentive
Norwich & Peterboro' BS 0845 300 2522 4.94% (F) for two years 90% £385 Yes
HSBC 0800 494999 4.99% (F) for two years 90% £1,499 Yes
Norwich & Peterboro' BS 0845 300 2522 5.09% (F) for two years 90% £495 Yes
HSBC 0800 494999 5.19% for two years 90% £999 Yes
Cheshire BS 0845 055 4567 5.49% (F) for three years 95% £899 Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T- Operated by Telephone
*W- Operated by Internet
*H- Operated by Internet/Telephone
*S- Available only to those aged 50 or over
*R- Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476476 (All rates subject to change without notice)
