Tomorrow – Friday 22 July – is set to be the busiest day for travellers exchanging holiday spending money, analysis by Tesco Bank suggests.

According to its own customer data, British holidaymakers are swapping pounds for the US dollar, euro and Turkish lira more than any other currencies this summer – and we’re taking more cash to splash too.

Tesco Bank’s average transaction values jumped from £288 pre-pandemic in 2019 to £344 today.

But with inflation now running at 9.4% and the cost of energy, food and fuel rocketing at home, making sure you don’t overspend needlessly while you’re enjoying a hard-earned break is likely to be top of mind for many.

To help you find the best deals on your travel money exchange rates, to ways to spend and how to keep mobile charges as low as possible, YourMoney.com shares top holiday money tips at home and away:    

Best foreign exchange rates

Currency values fluctuate constantly and the exchange rate offered by one provider and another will vary depending on a range of factors, including when they bought the currency themselves and whether they have any trading discounts.

This means one day your local high street exchange might have the best exchange rate and by tomorrow, they’re the worst.

It’s best to check a range of travel exchanges the day you plan to buy your currency and always aim to buy cash using cash or debit card as most credit card providers will charge a fee to purchase cash, be it in sterling or a foreign currency. There are lots of comparison websites online with a good range of providers, including MoneySavingExpert’s Travel Money Max.

See YourMoney.com’s Why you shouldn’t buy travel currency in the UK with your credit card for more information.

Check rates on your current cards if planning to use them abroad

Whether you opt to spend on debit or credit card, in cash or to use a top-up prepaid card when holidaying abroad is likely to depend on where you’re heading.

Whichever works best for you, the pros and cons vary wildly according to the provider you choose.

Some banks impose stiff exchange rates and will charge up to 3% in fees for using cards abroad while others consider it a unique selling point to offer customers fee-free payments overseas.

Some providers set limits on how much cash you can withdraw each day, some charge a flat fee for transactions – anywhere from £6 to £12 to take out £250 cash outside the UK according to data site Moneyfacts – and some will scale the fees up or down depending on how much you withdraw. Check the rates with your card provider before you go so you don’t get a nasty bill shock upon your return.

Check out fee-free cards for spending abroad before you jet off

Most debit cards levy a percentage fee of around 3% on overseas card purchases and cash withdrawals.

But there are several banks offering debit cards that don’t charge a fee on card payments and/or cash withdrawals abroad, including online banks Starling, Monzo and Chase as well as Virgin Money.

Starling and Monzo allow fee-free spending and withdrawals but both limit the amount of cash you can withdraw each day to £300 and Virgin Money levies a 3% fee on ATM withdrawals.

Currensea’s card lets you take cash out for free but if you use the free Essential Plan there is a 0.5% exchange fee if you pay by card.

Credit cards Barclaycard Rewards Visa and Halifax Clarity Mastercard both offer fee-free spending abroad, though you’ll need to clear the balance when you get home or face paying 23.9% interest on the Barclaycard and 19.9% on the Halifax option. These rates could also be higher depending on your credit rating when you apply for the cards.

There is an added advantage when making purchases on credit card between £100 and £30,000 abroad as they are covered by the Consumer Credit Act.

Under Section 75 of the Act, if you have a problem with a purchase that doesn’t show up or is faulty, you can claim your money back from the credit card provider who will then recover that cost from the retailer directly, saving you considerable time and hassle.

Another option if you’re worried about overspending on holiday is to use a prepaid card which you can top-up before you go.

Revolut, FairFX, Hyperjar, Wise and EasyFX all offer prepaid travel cards, which you can use abroad in the same way as a debit card. Each has a slightly different policy on fees so do check the small print.

There’s no restriction on when you top-up, and prepaid cards typically offer competitive exchange rates. If there’s a dip in the value of the currency you want to buy against the value of the pound, you could opt to top-up early and get more for your money.

Speculating on currency values, however, is best left to the professionals, particularly at the moment when currencies are in a period of significant uncertainty amid the Russian war on Ukraine, with values volatile.

Should you pay in sterling or euros when overseas?

Always pay in the local currency when you’re making purchases overseas. If you pay in pounds you are exposed to the exchange rate charged by the retailer or restaurant’s bank rather than your own, which is likely to be cheaper.

Car hire, cheaper flights and where to avoid buying currency

If you are planning to hire a car on holiday abroad, take a credit card with unused credit limit as companies lending out vehicles will put a hold on part of your balance before handing over the keys.

This is to cover possible damage to the car, any insurance excess payable and to cover the cost of paying fines for any traffic offences.

There are several credit cards offering Avios points, which you can use to get money off the cost of flights, or similar reward points that give you discounts on other types of purchase.

The Virgin Atlantic card rewards spending in the UK with Red credits which give you money off certain purchases – even when spending abroad. The card does charge a 2.99% exchange fee however, so make sure you work out whether the reward is worth more than the fee you’ll pay to use it.

American Express’s British Airways credit card is another offering Avios, which can be used to buy British Airways flights and can add up to serious money if used effectively. There are minimum monthly spending limits to qualify for the rewards however, so make sure it’s a deal that’s right for your spending habits.

Last but not least, don’t be tempted to leave getting your holiday money until you get to the airport – or even worse, when you land at your destination.

Foreign exchanges take full advantage of the limited last minute options to swap currency and you’re almost guaranteed to get considerably less bang for your buck by treating foreign money exchange as an afterthought.