Cheapest way to change money in London

The wise traveller heads off with a couple of different credit cards and an ATM/debit card in hand. These are by far the cheapest ways to get money in Europe or anywhere in the world: the traveller’s check is as dead as the LP (and far, far less cool.)

But I have top tips on the very cheapest ways to change money while abroad which could save you TONS of money and allow you to stop worrying about high charges.

What is the best way to change money for your trip? (from best to worst)

Good credit card (cheapest way)
Good ATM card (a bit more expensive)
Bad credit card (ones which charge fees - more on this below)
Money Exchange booths
Pre paid cards
Money Exchange booths at the airport (really, really bad idea - you're paying a fortune extra for no good reason!)
Traveller's Checks (really bad, almost the most expensive)
Dynamic Currency Conversion (where you pay in dollars in a place that normally takes pounds. The rates are shockingly awful.)

So what does all this mean? Well read on.

TIP 1: GET THE BEST CREDIT CARD FOR TRAVEL.

Done properly, using your credit card is the cheapest way to get money while abroad – you get brilliant exchange rates. The great news is that credit cards are widely accepted pretty much everywhere in UK, even for the tiniest of amounts of shopping. (American Express is the only exception, shopkeepers hate its high transaction fees).

But some cards will charge you up to three percent every time you use it abroad – it means that for the privilege of taking out $100 you get charged $103 for no effort at all on the banks part! With a big vacation like coming over to England that could cost you a fortune in unnecessary fees! To be honest there’s only one card worth considering for foreign travel which gets full marks in every corner:

Capital One. They’ll soon be the only card to charge 0% - that’s nothing, zilch, zip, not a dime – for purchases made abroad. Which is exactly how it should be for all of them! How does that compare to everyone else? Well just look!

The next best is Washington Mutual which currently charges 1% though that’s still 1% is YOUR money, and the merger with Chase means that rate may very well go higher.

Next: the real bad boys. These guys are just an excuse for the credit card companies to squeeze more money unnecessarily out of you... Using these cards is like burning money – if you can help it at all, DON’T USE THESE TO TRAVEL!

o Bank of America – 3% - NO!

o Chase – 3%

o Citi Bank – 3%

o HSBC – 3%

o Wells Fargo – 3%

o American Express 2.7%

o Discover – 2%

Bad, Bad, Bad! Don’t let them charge you! Change today. Even if you don’t normally bank with Capital One then it’s worth getting a credit card with them just for travel.

TIP 2: FOR CASH, WORK OUT HOW GOOD YOUR ATM/DEBIT/CHECK CARD IS

So credit cards are good for spending while you’re in Europe but obviously you’ll still need some physical money for smaller expenses – and even the best credit card will still charge you if you try and take money out on them using an ATM machine. These fees can often be extortionate – 4% or $10 a time is not unheard of and some companies (Citi for example, the sneaky devils) charge you interest from the second you withdraw the cash, erasing any grace period you may normally have. Obviously when you’re spending a lot (it’s your vacation, after all) this can mount up, and while it's all legal and you agreed to it because it was hidden somewhere in about 100,000 words of small print, it doesn't mean it's right.

The solution? Use a good debit, ATM or check card in an ATM machine. This will solve at least half the problem. Why half? Well, it’s important to realise that there are TWO possible sets of fees when you use an ATM machine:

The fee charged by your own card operator – usually a percentage of the transaction – so for every £100 you take out may end up paying £104;
The fee charged by the bank/person who owns the ATM machine – usually a set amount of say, £3.

With hardly any effort you can avoid both these fees.

OK, I will - but what does my bank charge?

Tricky, this – there are so many hundreds of debit card providers out there it’s impossible to list them all accurately. Sadly the only way to know for sure is to ask your bank before you travel. But there are companies who are consistently helpful to travellers in this area.

Hmmm.. can you tell me who the good guys are?

Yes! The best plan is to avoid the percentages. You’re going to be taking out potentially quite large amounts of money so percentages add up massively.

Top pick therefore goes to Schwab. They offer refunds of any fees on ATM machines worldwide and their High Yield accounts require no minimum balances and don’t charge monthly fees. Cunning travellers could open an account just for travel, and ‘charge it up’ with cash from your regular account before you go.

Bank of Internet offer some pretty good savings rates so if you want these anyway then they’re an ok option to travel with as they offer ATM fee reimbursement – but it’s only up to around $8 a month and they require a minimum balance.

Bank of America usually charge 1% plus a hefty $5 per transaction at most banks; however all this is waived if you get your money out of a branch of Barclays (there are quite a few around in London (find one)). Remember to avoid their nasty credit card rates though!

If your bank is charging per withdrawal, take as much out money as you feel safe with to minimise the number of withdrawals and the commission fees. But remember: it's not a good idea to carry more cash around with you than your travel insurance allows. Leave some secured, preferably in a safe, wherever it is you’re staying.

How do I avoid the second set of fees – those charged by the ATM machine operator?

Simple: use your eyes. UK law says that the machine must have a written sign on to inform you if it charges a fee to use the machine (and if so, how much) – you have to look carefully though, the text is often small!

If you want a general rough and ready guide, those at banks are always free for everyone, those at supermarkets are usually free and those at convenience stores usually charge their own fee.

TIP 3: AVOID MONEY EXCHANGE, BUT IF YOU MUST…

There are ATM machines in all of Europe’s airports so you don’t need to buy foreign currency before you go. Even when you’re there you will never be more than five minutes walk from an ATM machine in London. They really are everywhere in the UK and virtually without exception ATM machines offer better rates than the money exchange people.

However if you have a lot of dollars in cash you want to exchange for sterling you can get a better deal by doing two things:

1. Know the market rate. If you don’t know what a good rate is then you’ve no chance of shopping around properly – every major newspaper has them, usually tucked away in the business section. The market rate is charged by banks to each other and in practice you’ll never get as good a rate as a tourist, but try and get as near to it as possible.You can check the rates in advance, which will give you an idea of what's a good rate, but remember: they change quick.

2. If you just want a sure way to get a good – if possibly not the very best available - rate then head on down to Marks and Spencers. Rates change so fast that it’s impossible to keep up with the best bargains to change your money into sterling; but Marks and Spencers is usually among the most competitive. They’re actually (bizarrely) a rather good clothes and grocery shop which are common in London and across the UK. The bigger branches – like that on Oxford Street - have money exchange places (bureaux de change) which consistently offer good rates of exchange.

TIP 4: MAKE SURE YOUR CARDS ARE GOOD TO GO

There's no point shopping around, arranging new cards and checking rates etc unless you've also done a little groundwork back home to make sure they'll actually work in Europe:

Let your card issuer know you are going abroad before you leave home. Otherwise the bank anti-fraud systems can prevent you from using it when you need it most! This can lead to horribly expensive and irritating phone calls back home to sort it out.

You will likely have a daily withdrawal limit in US funds – know what it is so you’re not caught out.

Make sure your ATM card will work in Europe. It needs a Visa, Mastercard, Cirrus, Maestro or Plus logo on it. Other ATM networks are US-based, not international, whereas these four are universally accepted in Britain (and indeed most of Europe). If it doesn't have one of these on it, it's not going to work!

Make your PIN four digits. ATM machines in England don’t like it any longer, and you won't be able to enter any more digits than this on most of them. And those digits have to be numbers, not letters, as that’s all that shows up on UK ATM keypads.

If you can, try and have BOTH a Mastercard AND a Visa when you travel abroad. Although both are universally accepted in the UK with no problems, in some parts of Europe they’ll only take one and not the other. If you have two, you're covered for all eventualities.

TIP 5: PAY IT OFF AS SOON AS YOU GET BACK

I know it’s too early to be thinking about getting home from London when you haven’t even gone yet but borrowing on credit cards is expensive. Make sure you pay off the WHOLE DEBT amassed on the credit card as soon as possible, not just the minimum payment. Credit Cards are an expensive way to borrow money. Use them, as they’re mighty convenient for travel… but be clever about it!