Backpacker and Gap Year Money and Finance Advice

Most gap year or backpacker travellers will have had to work hard to save up the money for their trip. There are structured trips, especially those based around a particular charity, that will help to fund the adventure.

Even so, there will be times when a decision about finances will need to be made and for many it will be the first time another adult hasn't made the arrangements for them. If your gap year is to take you abroad you will most certainly have to deal in some way with foreign exchange.

We have produced this guide below with help from the British Bankers' Association.

  • Should I take foreign money, traveller's cheques or credit/debit cards abroad?
  • Should I take sterling traveller's cheques or currency traveller's cheques abroad?
  • What is the cheapest way to take money abroad?
  • Where do I buy my traveller's cheques and foreign currency?
  • Where do I exchange my traveller's cheques while abroad?
  • What happens if I lose my traveller's cheques?
  • Which will offer the best exchange rate: banks, bureaux de change, shops or hotels?
  • Why can't I just cash my own cheques abroad?
  • The exchange rate I'm offered when I buy (or sell) foreign currency isn't the same as the one published in the daily press. Why?
  • If I use my credit card abroad the transaction often takes quite a long time to reach my account. Is there a danger of getting a worse exchange rate than the day I used my card?
  • If I have foreign currency or traveller's cheques left when I return to the UK, what do I do?

What form of currency should I take?

It is a good idea to take a combination of currency. This should include cash, travellers cheques and credit cards. Your cash will come in handy if you need to buy food in small quantities or if you decide to take a taxi. Travellers checks can be cashed in when you need them most and credit cards mean that if you really are stuck you can rely on being able to pay your bill. You should do a bit of research into the type of credit card that is most commonly accepted at your chosen destinations.

What type of travellers checks should I take?

Sterling is widely accepted in most larger cities and towns. If you are travelling to the US you will need to take dollar travellers checks. Research this once you know your final choice of destination.

What is the cheapest way to take money on holiday?

There is always going to be a cost involved in currency conversion from sterling to US dollars for instance. There is a commission rate attached to foreign currency and travellers checks. You will also need to pay commission when it comes to converting any unused travellers checks when you return home. The exchange rates of many countries can fluctuate and if you are going on a long stay trip this can mean there are many fluctuations whilst you are away. You can withdraw local currency from cash machines. If you withdraw cash using your credit card your charges will be higher and there is the risk of some transactions attracting a handling charge.

Where do I buy my travellers cheques and foreign currency?

The deals on currency exchange have really improved over the years. There was a time when you had to order the denomination at least a week before you travelled. Now you can order online and receive the money the next day. Home delivery by courier is also possible. Otherwise your local bank or post office will be able to order it for you. With the Euro being accepted in most of Europe it takes out the need for ordering confusing multiple currencies.

Where do I exchange my traveller's cheques when I'm abroad?

Bureaux de change, banks, hotels, shops, but do compare exchange rates and commission charged.

What do I do if I lose my traveller's cheques?

When you purchase your checks you will be required to sign each one of them. Each cheque will have a serial number and when you exchange them for cash you will be required to sign for them again as well as produce your passport. The company you buy them from will have given you an emergency telephone number for you to use in the event of loss or if they are stollen. When you telephone the company they will cancel the cheques. Remember to keep a note of all of your cheques in a safe place.

Which currency outlet will offer the best exchange rates?

This is entirely down to your research!

Can I cash my own banks cheques abroad?

Some banks abroad will if you have a cheque guarantee card with you. You are likely to pay a higher commission by the bank cashing it.

How often do exchange rates fluctuate?

They fluctuate according to wholesale market movements. Oficial rates for any particular currency do not exist. Currency outlets will offer different rates for handling currency and/or travellers cheques. You should take a look at the commissions charged, what you gain in a 'good' exchange rate may be lost through agent commissions

How does the currency exchange rate affect payments using my credit card?

When the credit card company receives the transaction from abroad it will uses that days exchange rate and some days will be at a better rate than on others.

What should I do with my travellers cheques when I return to the UK?

Many banks will not accept foreign currency wihtout charging a commission to do so. On your return it is a good idea to spend any smaller denominations and return with only travellers cheques if possible. You will find that many places will convert your cheques free and not add any commission.