MONEY COMMENT
How To Avoid Holiday Disasters

By Cliff D'Arcy
June 11, 2003

In this article, we suggested that it's always worth shopping around for these items before going on holiday: travel insurance, holiday money and everyday essentials.

What's more, one thing we should avoid is taking only currency (notes and coins) when going away, either in the UK or abroad. Money is far too easy to steal, and it's the simplest thing in the world for a thief to spend. Here are some tips on managing our holiday money:

Don't take all your money in cash

Really, how much cash you take is down to you and how much you worry about your personal safety. As a six-foot, fifteen-stone ex-rugby player, I imagine that I worry less than most people! Perhaps a good idea would be to take half your spending money in cash and divide it among the adults travelling with you to spread your risk.

Take care: travel insurance policies usually limit compensation for lost or stolen cash to £250 or less, so check your policy documents carefully before travelling.

Travellers' cheques are easy to replace and safer than cash

TCs usually cost the same to buy as currency, but watch out for commission (usually 1% to 2%) and exchange rates. You may be charged commission when cashing TCs – up to a stonking 6% in some foreign banks, so ask before you sign!

You can take Sterling TCs, but it's a good idea to buy euro TCs if travelling in the eurozone, and dollar TCs for the US (and many remote countries).

Take a debit and credit card

It's a great idea to take credit cards abroad, as millions of outlets accept them and you may enjoy some legal protection if goods you buy prove faulty.

With debit and credit cards, your bank will charge you a commission or "loading charge" of up to 3% of your foreign purchases (although Nationwide BS doesn't), plus up to 2.5% more if you use a cashpoint abroad. What's more, credit card issuers usually charge interest on cash withdrawals until you have settled your bill in full, so check these charges carefully before travelling.

Always safeguard your cards as you would cash, as card fraud abroad is soaring, especially in France, the US, Spain, Australia and Italy. The banks estimate the annual cost of stolen and 'skimmed' (copied or cloned) cards to British cardholders is an eye-watering £430m.

So, never let your cards out of your sight, keep hold of all receipts and watch out for any dodgy transactions on your statements.

Know the exchange rate before you go

A few months ago, one mighty Pound Sterling would have bought you 1.57 euros. Now, the rate is more like 1.35 euros to the pound – a lot less for your money. Make a note of prevailing exchange rates before leaving to make sure that you're getting fair value while you're away.

As a mathematician, I love to come up with algorithms (mathematical shortcuts) to translate from £s into other currencies and vice versa. Let me give you an example, using the euro:

£1 = €1.35, which is pretty close to one and a third euros, so four euros is roughly three pounds. To turn euros into pounds, multiply by 3 and divide by four. So, €100 is 100 x 3 ÷ 4 = £75 (£74.07 using the exact exchange rate).

Enjoy your trip!

More: Holiday Loans | Credit Cards | Avoiding Travel Blunders