Money news, advice and predictions for savers and spenders.
By Jeremy Gates
For British travellers in Europe this summer, the cost of everyday living is painfully high because the pound is so weak against the euro - among many other currencies.
With a coffee likely to cost over £4 in both Paris and Barcelona, and cheapest meals for two coming in around £35, there's a stronger case than usual for getting the best possible conversion rate on your money.
But a survey by International Currency Exchange (ICE), a long-established currency supplier, reveals that only 10.4% of travellers take advantage of online exchange rates, where the best rates clearly tend to be.
One in five leave it to the last minute and change money at the airport, where they are almost certain to get a poor rate. Around 15% rely entirely on credit or debit cards, where providers are reckoned by price comparison service uSwitch.com to collect fees and charges worth £281 million a year.
"It is astonishing that with the current focus on making money go further, travellers are not taking advantage of the best rates and commission free deals available online," says ICE head of marketing Andrew Hamilton.
The ICE survey found that some places can still offer reasonable value for Brits: in the past year, the pound gained more than 18% against the Polish Zloty, and dropped only 6.5% against South Africa's rand.
Against the US dollar, vital for nearly two million Brits bound for Florida this summer, the pound has lost 17% of its spending power in a year. But in the last six months, it has rallied by 20%.
The current dollar exchange rate is "advantageous" for Brits, according to David Lamb, head of treasury services at No1 Currency, Scotland's leading currency provider. He thinks it could approach 1.80 dollars to the pound, perhaps, near Christmas.
FairFX, a prepaid MasterCard available in Euros or dollars and loaded online or by internet bank transfer, has a current rate of 1.67 dollars to the pound.
"There may be a case to lock in at that rate," says FairFX chief executive Stephen Heath.
"While still way below the two dollars to £1 levels of July 2008, the pound has rebounded 25% from the 23-year low of 1.35 dollars seen in January this year. Getting dollars on a currency card now could get the best rate available so far this year."
In a tight-fisted summer like this one, a prepaid currency card should have all sorts of attractions.
Like other cards, it is used to pay at shops and to withdraw money from cash machines, but cardholders can only spend the amount already loaded on the card.
Although travellers need cash for drinks, lunch and incidentals, the prepaid card is usually a safer bet on bigger items and for use at ATMs.
ICE's Travellers Cashcard is available in pounds, dollars and euros, and is accepted at over 25 million ATMs, shops and restaurants in over 120 countries worldwide.
"As it is PIN protected, it offers better protection and means travellers avoid carrying much cash around," says Hamilton.
There are 3.5 million prepaid cards in use worldwide. Market leader Travelex reckons its Cash Passport is the only product to go beyond the standard three currencies (sterling, Euros, dollars) to include Australian, New Zealand and Canadian dollars plus the South African rand.
Earlier this month, Travelex announced it was axing fees for cash withdrawals using the Cash Passport for new and existing customers. Its 24-hour Freephone line promises to wire money in an emergency within 20 minutes, and there's a new four-hour online pre-order service for euros and US dollars.
"Demand is increasing for prepaid cards which control holiday spending while avoiding unexpected charges and security risks associated with cards directly linked to a bank account," says Steve O'Donovan, managing director of Travelex Europe and North America.
Thomas Cook is adopting the Travelex service for its own Cash Passport prepaid cards, covering the same seven currencies.
"We expect our new versions to be a huge hit with long-haul travellers," says Peter Constanti, its chief executive of mainstream travel.
However, a Which? Money survey found that although three-quarters of its members knew about prepaid cards, only 3% had bothered to get one.
Heath and his business partner Ian Strafford-Taylor aimed to bring the Easyjet low-cost online model to currency conversion in launching FairFX in 2006 - now they handle £100 million worth of foreign currency a year through cards and cash.
Low costs keep their exchange rate consistently high in 'Best Buy' charts; its only charge on ATM withdrawals will be the one levied by the machine owner.
Of course, saving on prepaid cards is maximised if buyers are canny enough to buy at a favourable exchange rate: different rates apply to top-ups - by telephone or internet, debit card, and sometimes by text message or in person.
Prepaid cards also avoid foreign exchange fees on purchases made abroad, provided the local currency matches that on the card. A cross-border fee would be charged if a prepaid sterling card was used in the eurozone.
Some cards do charge fees for top-ups (Debenhams' prepaid MasterCard charges 2.5% for adding funds by credit or debit card), while others charge for calling the customer helpline.
However, few charge application fees, and FairFX claims its fee is waived in around 90% of cases.
In the next fortnight or so, FairFX will issue a sterling card for use abroad. There will be no charge for ATM withdrawals, but a fee of 1.5% matching the charge applied by UK debit and credit cards, could apply.
For travellers still faithful to credit and debit cards, two consistently figure among the best buys.
Abbey's Zero card has no foreign loading fee or cash withdrawal fees, but cash withdrawals incur interest from day one.
The debit card on Nationwide's FlexAccount promises no fees on cash withdrawals or spending within Europe, and outside Europe it incurs only the standard 0.85% fee levied by VISA. But you need an account with Nationwide to get one.
:: Information: Applications for FairFX card can be made online at FairFX.com; Thomas Cook Cash Passport prepaid cards on www.thomascook.com/money and at High Street branches of the travel agent; ICE (0870 850 5091 and iceplc.com); No1 Currency (0131 476 7373 and www.no1currency.com); uSwitch.com (0800 093 0607 and www.uSwitch.com).
Poundnotes
:: Energy bills are usually lowest on online accounts, and E.ON claims that its new 'SaveOnline' tariff which replaces the EnergyOnline Extra Saver v14 will be the cheapest web-based energy product of the lot.
Dual-fuel customers signing up to SaveOnline will typically pay £1,017 per year, saving £41 per year compared to average online prices and 17% on E.ON's Standard off-line prices.
The discount, which varies regionally, is guaranteed until at least October 1, 2010.
To join SaveOnline, customers must pay by fixed monthly Direct Debit and agree to manage their energy account online and receive online paperless bills.
See www.eonenergy.com for more details.
:: The move by Nationwide BS to slash its its personal loans rates from August 9 to offer a typical 7.7% APR on £5,000-£14,999 advances has been applauded by Moneysupermarket.com's Tim Moss.
"Nationwide has really bucked the trend in the loans market by offering the most competitive personal-loan rate by quite some margin," Moss says.
"Loan rates have been going up since the start of the credit crunch. In April 2008, best-buy loans were around 7.34%, but have now risen closer to 9%. This Nationwide cut is the first suggestion that we may be over the worst in the loan market."
Nationwide's Chris Rhodes says the move underlines the benefits of taking out the bank's FlexAccount.
"This will be the first of many offers for Nationwide current-account customers over the coming months."
:: A whopping £540 million raised by pensioners taking cash from their bricks and mortar by equity release will be spent on home and garden improvement, says specialist financial advisor Key Retirement Solutions (KRS).
"Pensioners play a huge part in the UK economy, and as more and more look to maintain and improve their homes and gardens, equity release is an ideal source of funding," says Dean Mirfin at KRS.
Many pensioners apparently apply for the Focus DIY discount card targeted at the over-60s when they improve their homes.
For more details call 0800 531 6010 or see www.keyrs.co.uk/equity-release-guide.
:: Promising 0% commission, the new Post Office Overseas Property Money Transfer Service is intended to ease the transfer of funds between UK and overseas banks, and allows customers to fix at a favourable rate of exchange for up to a year ahead to guard against volatile currency fluctuations.
It could be particularly useful to overseas property owners, by making repayments easier on a foreign mortgage and by providing funds for ongoing maintenance costs and utility bills.
It might also provide an easy way to bring money back into Britain when an overseas home is eventually sold.
Enquiries: 0800 180 4702 and www.postoffice.co.uk/moneytransfers.
:: High-five savers:
Phone No Rate Account Period Deposit Interest paid
West Bromwich BS www.westbrom.co.uk 5.45% (F) E Bond 32 31/07/14 £5,000 Yly
Barnsley BS www.barnsley-bs.co.uk 5.40% (F) Online Bond 30/09/14 £100 Yly
Aldermore 01372 736700 5.40% (F) Fixed Rate Bond Five Year Bond (P) £10,000 Qly
United Nat'l Bank 0800 218 2266 3.50% Three Month Gold Deposit Three Months £1 Half-yearly
Manchester BS 0161 923 8015 3.26% Premier ISA 45 Issue 1 45 Days £1,000 Yly
Nottingham BS 0845 155 6330 3.15% Postal Access 50 50 Day (P) £1,000 Yly
:: Top-five borrowers:
Phone No Rate Period Max% Adv Fee Incentive
HSBC 0800 494999 2.49% discounted for two years 60% £249 Yes
First Direct 0845 610 0100 3.09% variable for term 80% £999 Yes
Co-operative Bank 0800 633 5286 3.24% to 30/09/12 75% £995 Yes
Loughborough BS (FTB) 01509 610707 3.39% for two years 80% £449 Yes
First Direct 0845 610 0100 3.69% for term 75% £299 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 476 476 (All rates subject to change without notice).
