Two thirds of us are heading for a nasty holiday money shock
A new study reveals that a third of us are confident that we know what we'll get when we exchange our holiday money - unfortunately most of us are wide of the mark - and we're in for a very nasty shock.
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No1 Currency asked people if they knew the exchange rate for their holiday destination, and 30% of people said they did. They then asked people to estimate what they would get for their pounds, and 64% of travellers over-estimated. The problem was particularly acute among younger people - because 73% of people aged 25-34 didn't know how many Euros they could get for their money.
Almost one in ten thought the Euro/Sterling exchange rate was more than €1.5 to the Pound, while 13% thought the Dollar/Sterling rate was more than $1.5 to the Pound. In fact, over the past five years the Euro/Sterling exchange rate has never been as high as €1.5; and even at its peak in 2015, it was below €1.4 to the Pound.
The exchange rate as been on a downward path for years now. In 2015 £100 would have bought you €139.18 and $150.94. In 2017, it will buy €114.75 and $121.47.
Simon Phillips, Retail Director at No1 Currency, comments: "After last year's Brexit ruling, the Pound is on the ropes against the Euro and Dollar. Too many Brits continue to think it is worth a lot more than it is."
It means we could be in for a nasty surprise when we exchange our cash. Even more worryingly, if we pay for things on plastic while we're away, we could end up paying a third more than we think if we use rough rules of thumb to do the currency conversion.
What can you do?
Before you decide where to take your Easter or summer holiday, it's important to check the exchange rate, so you fully understand the impact on the cost of your holiday before you pay any cash over at all.
Next, you need to think about when to change your holiday money. Philips points out: "Conversion rates can make a substantial difference to the cost of a holiday. In the current economy with the volatility of the pound, consumers should be aware of the rapidly changing exchange rates."
The experts agree that currency exchange rates are unlikely to recover substantially in the short term, and may even fall further. This would mean it makes sense to exchange your holiday money sooner rather than later. However, there are no guarantees, so one option might be to exchange half of it now, and half of it just before you travel - so you can at least be sure that you don't end up exchanging everything at the worst possible time.
Finally, the dropping of the pound means it's more important to shop around for the best possible exchange rate. If you are exchanging a reasonably large sum of cash, it's worth looking at the online currency exchange firms too - because even when there is a delivery fee, you could still end up with more holiday money than on the high street. It's also worth looking into a prepaid holiday travel card, which will fix the rate when you load cash onto the card, but save you from carrying too many notes around with you for comfort.
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