With political rows and the on-off threat of a no-deal Brexit, there’s no guarantee what could happen to the pound between now and 31 October – or after that date.
Most experts predict that sterling will fall and warn that British holidaymakers in Europe could see an increase in the cost of trips, meals and drinks.
But the good news is that if you have a trip planned, organising your holiday spending in advance can save you significant amounts and help to stretch your budget.
So, how far should you go to protect yourself? A fee-free spending card is wise, but is exchanging in advance or locking into rates essential, and would you even stash your holiday cash in gold?
We get some tips and look at some of the accounts can help.
As Brexit looms travelers are getting more concerned about losing out in the event of the Pound falling even more than it already has
1. Brexit proofing through gold
Would you keep your holiday cash in gold? One provider, Tally has launched a banking app that offers individual banking accounts where you can save and spend in physical gold both at home and abroad.
Savers have long considered gold a ‘safe-haven’ in times of economic and political uncertainty.
The banking platform explains that when customers make a deposit through the app, they are buying Tally gold at the global wholesale price, which is kept in a secure vault in Switzerland. One Tally is equal to one milligram of physical gold.
The money can be accessed through the Tally bank accounts linked to a contactless Mastercard debit card. Tally says: ‘Customers use Tally to spend anywhere that accepts Mastercard, with no fees.’
The platform does, however, apply a single monthly charge of 0.1 per cent of the average monthly holding, which it says covers storage, security, insurance and operational costs.
Phil McHugh, of Currencies Direst says that Brexit-induced fall in the pound is not the only reason for the strong performance of gold, which is traditionally denominated in US dollars.
He says: ‘Gold has been the star performer and is a natural winner when uncertainty and risk is high.
‘Gold is currently marching to test six year highs and its rally is supported more by global trade tensions between the US and China than Brexit.
‘The price of gold looks set to continue to rise given recent escalations in US/China trade relations, and anyone looking to hold gold should be aware of possible price rises in the coming months.’
Tally’s app is available on the App store or Google Play store.
Phil McHugh of Currencies Direct says the Pound could fall even further in a no-deal scenario by as much as five to 10%
2. Consider exchanging ahead of your holiday
Aashna Shroff, personal finance expert at money.co.uk says: ‘If you’re travelling over the next month, it could be worth buying some of your travel money now to mitigate potential currency fluctuations.’
According to McHugh the pound could fall even further in a no-deal scenario by as much as five to 10 per cent. However, it won’t do badly against all currencies.
McHugh explains: ‘The pound’s fall has been more painful versus currencies that do well in a risk-off environment such as the US dollar, Swiss franc and Japanese yen.
‘It’s not all bad news – the pound has actually held similar levels versus the Australian dollar when looking back over the last year and gained against the Swedish krona, Turkish lira and South African rand.’
To get the best deal, it’s important to monitor the exchange rates closely. McHugh says: ‘Transferring £1,000 into euros back in March would have netted you roughly €1,170, whereas the same transfer in July would have been worth around €1,100.
‘As you can see it really pays to keep an eye on exchange rates and try and time your transfer for when it is most favourable for you.’
Exchanging money at the airport could end up costing you more. Consider making an exchange now if you find a good deal on the exchange rate
3. Ditch your debit card
According to Defaqto, a financial information business, the most expensive way for travellers in Europe to spend is by using their debit cards.
It admits there are a few cards that don’t charge, but with the convenience of contactless, you could easily rack up charges if you have a card that does.
Defaqto says: ‘A daily €5 breakfast of coffee and a croissant over a fortnight could end up costing a whopping £21 in addition to the €70 spent on your breakfast.
Using your debit card is the most expensive way for travellers to spend, according to Defaqto
4. Use your credit card
If you prefer to use a card, Defaqto refers to the credit card as ‘the hero of holiday spending’.
The company claims that credit cards can be as cheap as cash and also provide holiday makers with consumer protection relating to anything purchased between £100 and £30,000.
Defaqto points out: ‘An evening meal costing €25 could cost travellers between 46p and 68p. In comparison, the same payment using a debit card could cost between 40p and £1.88.’
The credit card has been described by Defaqto as the ‘hero of holiday spending’
5. Don’t draw cash abroad
Making withdrawals abroad is usually very expensive. Shroff says: ‘If possible, avoid drawing money out of a cash machine whilst overseas.
‘Not only will your pound not go as far as it used to, but you are also likely to be hit with charges for using the ATM.’
6. Pay in advance
If you’re booking a hotel or hiring a car, consider paying for these in advance and you could save money.
Shroff says: ‘Many operators will give you the option of reserving these services and not paying until you arrive or check-out, but by paying in advance, you will know what the trip will cost you, without any surprises from currency fluctuations.’
Consider using these current accounts for spending when you are abroad in Europe as they have no debit card fees
7. Avoid expensive pre-paid cards
You can load foreign currency on pre-paid cards and transact with relative ease. However, according to Defaqto, they come with a few disadvantages too. Most of them have high fees and there are other catches like loading or renewal fees.
Defaqto says: ‘Some (e.g. Asda) have very expensive non-Sterling exchange fees and should be avoided. Also, many cards cannot be used for car hire, and customers might also have difficulties at petrol stations, where payments often cannot be pre-authorised.’
Many prepaid cards come with high fees and other catches like loading or renewal fees according to Defaqto
It added: ‘Of the 58 Sterling or Euro denominated pre-paid cards studied by Defaqto, only five have no fees for adding money, no service charges, no transaction fees, and no renewal or dormancy fees.
‘Some (13 out of 72) prepaid cards charge a fee to load money onto the card from a debit card – typically two per cent. Another six charge a flat fee of 50p or £3 to load money onto the card.’
Avoid withdrawing money from ATMs if you are holidaying abroad as this can be more expensive than swiping your card
8. Watch out for any news on negotiations
It’s a Mexican stand-off between the UK and Europe, when it comes to Brexit. However, things could change for the pound if the UK and the EU do decide to sit around a table and talk about a new deal.
McHugh explains: ‘If the UK and EU do start negotiating and reach a deal, then we expect a very sharp reversal in the pound.
‘Although this outcome for now is looking less likely, things can of course change very quickly.
‘For those brave enough to hold out, the payoff could be significant.
‘A sensible approach would be to buy at least half of your currency now, as the Brexit endgame will lead to a big swing up or down depending on the outcome.’