Should you buy euros/dollars now, before the general election?

Update Wed 7 June. This blog was written a couple of months ago, though the principles remain the same. Do note, currency rates have changed since and so too have some of the cards listed below so check our guides or eligibility calculators linked to in the relevant sections below for the latest deals on plastic.

Yet two minutes now can let you relax when you’re abroad, knowing you’re getting the maximum bucks (or euros) for your bang.

With Easter now behind us and summer on its way, I was already finding my social media feeds starting to jam with people asking me questions about whether or not to buy their holiday money now. Then the election meant a flurry more, like these…

@MartinSLewis thoughts on buying currency for a holiday in Europe two days after election? @MoneySavingExp

— Polly (@thepolywords) April 18, 2017

Many have got what I call the holi-wobbles. I recently ran a Twitter poll and over 5,000 people responded – 12% of those who intended to go abroad have given those plans up, and a further 35% say they’ll go, but be more careful with their spending. So I’ve bashed out an answer to explain your options for euros, dollars or ANY currency…

Currency moves are complex

While an election adds to the uncertainty, the exchange rate you get doesn’t only depend on what happens in the UK. The strength or weakness of the currency you’re getting is just as important.

For example, after the Brexit result, which the markets (rightly or wrongly) didn’t like, the pound dropped against the euro, but dropped more against the dollar – because the euro itself was weakened by the result.

Many factors affect currency movements – general economics, speculation, relative interest rates, political stability and more. And while an election brings uncertainty, that uncertainty is known and tends to be incorporated into the current price of the pound.

What will happen to the pound before and after the election?

Put simply… I don’t know. And anyone who tells you they do is a liar. Currency rates fluctuate each minute, both on the economics and the whims of City traders trying to second-guess those movements.

Of course someone will say, “Buy now”, someone else will say, “Wait”, a third that rates will stay the same. One will be right, and may say, “I told you so”, but that doesn’t mean they knew.

Personally I don’t bother to guess; I ensure I get the best rates when I go (more on how below), however…

‘If you’re nervous, hedge your bets’

To do this, buy roughly half what you need at today’s best rate, therefore locking that in, and then get the best rates when you travel (again, more on the practicalities of how to do that below).

If you’re really nervous, ask yourself, “Would I be content with today’s rate of €1.20 for my holiday money…?” If so and your real fear is the rate worsens so your holiday would be unaffordable, play safe and buy more than half now.

Yet do that for safety’s sake, and if the pound strengthens, and you’d have been better off waiting, don’t let hindsight bitterness ruin your holiday.

A very short-term way to protect against currency swings

A few bureaux de change’s terms can be manipulated to give you short-term protection against currency swings. These allow you to order for collection at today’s rate, and cancel in up to 14 days’ time. That way if the rate weakens you’ve locked in; if it improves you just cancel and buy at the new better rate.

Yet these bureaux tend not to have great rates, and we’re only talking 14 days so it’s not much use for the summer. However, if you were buying just before the election to go away just after, this could be a useful insurance against big swings. See cancellation bureaux for full info.

How to get the best rates

So enough of the theory, let’s move on to the practicalities of how to get the best rates, now or when away.

• Take two minutes to get near-perfect rates worldwide, every time you’re away. The easy option is to get and spend on one of the specialist overseas credit cards that you religiously pay off IN FULL every month (or you pay up to 29.9% APR interest – in which case don’t do it).
  
  This gives you the same near-perfect exchange rates the banks get on the day you spend, in almost every country, time and time again, as unlike most debit and credit cards which add a 3% ‘non-sterling exchange fee’, these don’t charge.
  
  There are about eight of these cards – to see which one you’re most likely to be accepted for, use our Overseas Cards Eligibility Checker, which shows your acceptance odds for most of the top ones. If you’ve a decent chance of all of them, Mastercards tend to give better rates than Visas.
  
  The top two of those are Halifax Clarity, which has long-term good feedback and low ATM withdrawal costs, and newer player Creation Everyday, whose ATM fees are a smidgeon cheaper.
  
  It’s cheaper to spend on these cards than to withdraw cash and spend that, as there can be a cash withdrawal fee, and you may pay interest on cash withdrawals (not spending) even if you fully clear the card. Yet even then they beat most bureaux de change. For more details see Top Travel Cards.

• Top prepaid cards give you today’s top rate, and are easy to get. Prepaid cards have no credit check so anyone can get them. Plus unlike credit cards where you get the rate on the day you spend, with these cards you usually pre-load them with cash before you travel, at that day’s rate. So it’s a good way to bag a rate now for spending later.
  
  Of course if the pound strengthens by the time you holiday, you lose; if it weakens, you gain. The current top picks are Revolut and WeSwap, on rate and the lowest charges. For full options, details and analysis, see Top Prepaid Cards.

• Want today’s best cash rate? Compare rates from 30+ bureaux. If you want cash, of course you get the rate on the day you pay. Ignore any flannel like ‘commission-free’. What you want to know is, “If I give you £500, how many euros will you give me after all charges?” and that’s the way to compare.
  
  You can do this online via Travel Money Max, which compares about 30 online bureaux. It also shows you how extortionate it is to change at airports or ferry ports. If you must do that, at least pre-order for pick-up, as you get a better deal.
  
  And beware paying for currency at UK bureaux by credit card, as this counts as a cash withdrawal, so there’s a fee and interest even if you fully repay – so it’s best to pay with a debit card, or cash.

• Get a UK euro bank account. This is only worth doing if you travel to Europe a lot (perhaps you own a holiday home) – or spend substantial amounts. A few UK banks offer these, including Citibank, Barclays and Lloyds Bank (monthly fees may apply, so check).
  
  They operate as a normal bank account, but in euros. If you’re depositing cash, the bank will usually do the conversion for you on that day, but be careful as the rates are usually awful – so don’t do it automatically, check in advance.
  
  You can often call the bank to try to negotiate a better conversion rate (especially for larger amounts). Alternatively, use one of the international money transfer firms to deposit the cash there for you.

What will you do?

So where do you sit on this? Will you hedge, get a specialist rate? Do let me know…