Holidaymakers can save hundreds of pounds by ordering their travel money online or by using the right card to withdraw cash abroad, a mystery shopping exercise by The Times has found.
Bureaux de change at airports offer by far the worst rates but many high street branches also offer poor deals.
Customers can get almost 10 per cent more euros for their money online than by walking into a typical high street chain.
The best deal available in our research was offered by air.money, which gave €1,098 for £1,000, with the cash sent to your home at no extra charge. On the same day, £1,000 taken to a Travelex branch in London would return only €1,019 and £1,000 taken to the Post Office would return €1,050.
A family changing £3,000 of holiday money at the best rate online would have an extra €237 to spend on holiday.
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Customers wanting the convenience of the high street can make savings by ordering online in advance for collection in a branch, although the deals are still not as good as online-only operators.
The Post Office website offered €1,086 for £1,000, which you can collect from a branch two hours after ordering, while Travelex’s online service for next-day collection offered €1,082.
An analysis of company accounts by The Times found that while operating costs are higher at high street bureaux de change, which have to pay premium rents and higher insurance for storing cash, so are operating profits.
Profit margins at the Change Group’s bureaux de changes have averaged 10 per cent over the past two years, helping their owners make handsome returns at travellers’ expense.
“People using a debit card abroad in shops should be wary of transaction charges
Holidaymakers who use their debit cards abroad are also likely to get a better deal than on most high streets.
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Tourists in Europe using Santander and Barclays debit cards to withdraw cash on the same day we visited high street bureaux de change in Britain would have got €1,075 for their £1,000.
Most debit cards use wholesale exchange rates but also charge a “loading fee” which is in effect a commission, usually of between 2.5 and 3 per cent. On top of that, most cards charge a withdrawal fee, usually of between 1.5 and 2 per cent, or a set fee, such as Barclays’ £1.50 charge per withdrawal.
People using a debit card abroad in shops should be wary of transaction charges. Many banks levy “spending fees”, such as Halifax, which charges £1.50 every time the card is used even for small purchases. Selecting to pay in local currency on a card machine can also be a mistake because the exchange rate is usually worse than your bank, on top of the transaction charge.
The big bureau de change groups also offer pre-paid or currency cards allowing customers to lock in online rates before they travel or benefit from wholesale rates when they withdraw cash abroad.
Travelex’s Supercard offers the wholesale rate with a withdrawal fee of 2.99 per cent, meaning £1,000 gives €1,088.
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However, holidaymakers who want to guarantee the absolute best rate should withdraw cash using a specialist credit card, according to Moneysavingexpert.com.
It recommends the Creation Everyday card, which uses a wholesale exchange rate and has no spending or cash withdrawal fees and an interest rate of 12.9 per cent. To ensure the best rate, customers must clear their spending balance in full each month and pay for any cash withdrawals by bank transfer at the first opportunity.
The website also says that some specialist bureaux de change can beat online rates, although this is rare.
Owners who make money their business
Despite paying huge rents to airport operators, the four biggest bureaux de change groups in Britain make millions in profit each year, generating massive wealth for their owners (Andrew Ellson writes).
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International Currency Exchange and the Change Group are family-owned businesses. Moneycorp is run by private equity investors registered in Jersey. Travelex is controlled by an Indian billionaire entrepreneur.
The Change Group, which has 20 shops in Britain, including two at Glasgow Prestwick airport, is run by Sacha Zackariya since his father, Mohammed, died last year. He lives in a five-floor Georgian townhouse in London, which he bought with his wife, Helena, two years ago for £4.7 million.
International Currency Exchange, which runs 49 bureaux de change in Britain, including shops at Glasgow, Luton and Edinburgh airports, is run by the Tejani family. Seven of the nine directors on the board are family members, according to the company’s accounts.
However, the wealth of the Tejanis is nothing compared with the Indian businessman who controls Travelex, the UK’s biggest foreign exchange operator. Bavaguthu Raghuram Shetty, who bought a 51 per cent stake in the business in 2014, is worth £2.13 billion, according to Forbes. His stake in Travelex is thought to be worth £1 billion.
His pied-à-terre in Dubai is the entire 100th floor of the Burj Khalifa tower, the world’s tallest skyscraper. Back home in Abu Dhabi he owns seven Rolls-Royces, including a Phantom, and was instrumental in the construction of the United Arab Emirates’ first cricket stadium.