In Depth

Brexit: What to do about your holiday money

Decision to leave the EU sent the pound to 31-year lows against the dollar

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The UK’s decision to leave the European Union in last week’s referendum has had an immediate affect on exchange rates. The pound fell to a 31-year low against the dollar on Friday and Monday, and is currently trading at around €1.21 to the euro.

“A €1,000 holiday in the Eurozone  would be about £60 more expensive for Britons buying their euros now, compared with this time last week,” says Sebastian Mann in The Standard.

So, what should you do if you haven’t yet bought your holiday money yet?

“Holidaymakers are left with two options when it comes to arranging their holiday money,” says Rebecca Rutt on Thisismoney.co.uk. “Exchange now to lock in today’s rate in case sterling falls again or wait until nearer your departure and wait to see if the pound recovers.”

If you don’t have time to wait, or fear further falls in sterling, then you need to pull out all the stops to make sure you get the absolute best exchange rate in order to minimise the extra expense. With a difference of £66 between the cost of €1,000 euros depending on where you shop getting the best deal is well worth it. You can compare exchange rates using Moneysavingexpert’s holiday money calculator.

Normally, at this point I would also recommend taking a specialist credit card with you on your holidays too. But, the problem there is you’ll get the exchange rate at the point when you pay. That means if sterling continues to fall you’ll get a worse rate when you shop.

But, equally if sterling improves while you are on your holidays you could end up spending less. If you do decide to take one Halifax’s Clarity card offers the best exchange rate with no foreign exchange fee.

Alternatively, consider taking a pre-pay currency card. This will allow you to pay with plastic when you are abroad but you can lock in an exchange rate when you transfer money onto the card. The Revolut pre-pay card gives you the interbank exchange rate with no spending fees and no ATM fees unless you withdraw more than €650 a month, when a 2% fee kicks in.

At present you could load €1,000 onto the card at a cost of £823, that’s £18 cheaper than the best currency exchange for cash.

If you aren’t travelling for a while you have time to wait and see what will happen to sterling for a while. But, “it is very difficult to second-guess what’s going to happen in the currency markets,” says Martin Lewis, founder of MoneySavingExpert.com in The Telegraph. “The only thing I can guarantee you is that the pound is going to get weaker, stronger or stay the same.”

Anyone who doesn’t want to take the risk of sterling falling even more before their holiday could opt for an advance currency purchase. The Post Office offers this service, it means you can lock in today’s exchange rate but collect your money in the future. If the rate improves you can cancel the order for a full refund as long as you give 24 hours notice.

“These rates aren’t the best, but if you want security then it’s an option,” says Tara Evans in The Telegraph.

Your final option if your holiday isn’t for a while is to hold tight and hope that sterling recovers ground before you set off for the sunshine.

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