Travel money: When is the best time to buy?

Hotel booked? Check. Travel insurance? check. Sun tan lotion, sunglasses, reading books all packed? Check, check and check.

Foreign currency? Oh, I will sort out that when I arrive.

When it comes to purchasing holiday cash, many of us leave this till the last moment and sometimes completely ignore it until we have arrived at the airport.

According to a YouGov survey, the most popular choices for consumers looking to buy their holiday spending money before they went away included visiting the local high street, such as a travel agent, or alternatively visiting the Post Office.

But going to your local bank, visiting the Post Office or using your card abroad is not always the most cost-effective way of purchasing your holiday spending money.

Just as you will look for the best deals on hotels and flights, you should do the same when it comes to purchasing foreign currency.

It is a commodity which is often lumbered with poor exchange rates and high transaction fees.

Whatever you do, if you are looking to get the best rate then do not consider buying your holiday cash at the airport as it is the most expensive way.

Knowing where the rates are heading is not an exact science”

Timing is a key issue and you would be wise to start thinking about currency at least a month before you fly off.

As a first step, taking a look at the exchange rates would be a good start as you want to maximise how much local currency you can get for your pound.

Looking at the euro, until relatively recently the single currency had maintained its strength.

We have recommended that customers purchase their euros as soon as possible whenever they saw the pound make gains against the single currency.

However, while writing this article, sterling has performed more positively against the single currency.

Consequently, holidaymakers do not need to rush out and buy their euros now.

We see the single currency continuing to decline and as a result we think sterling will appreciate throughout 2012.

In contrast, if you are looking to head out to the United States, you would be wise to purchase your dollars sooner rather than later.

At the moment, the pound is performing well against the dollar but that is not expected to last.

Knowing where the rates are heading is not an exact science.

But greater knowledge of the value of the currencies you are looking to buy can save you money in the long run.

The next thing to look at when buying your holiday cash is where to get it from.

While going through a high-street brand or being attracted by adverts of 0% commission is an easy option, you should shop around for the best rates and look at as many currency providers as possible.

Travellers' cheques used to be the item of choice, allowing people to safely and securely buy large amounts of currency.

However, travellers' cheques are largely redundant these days and have been ousted by greater use of debit and credit cards.

Nonetheless, using your personal debit or credit card is not always the best option, both in terms of rates and security.

A modern alternative is to apply for a prepaid currency card.

You load it with money on a computer or over the phone before your trip.

Then you use it like you would use your debit or credit card back home.

Prepaid currency cards are becoming increasingly popular as they offer better exchange rates compared with debit and credit cards.

They also offer security as they reduce the amount of cash you are carrying around.

If lost, they are not linked to your main bank account back home.

They tend to be Visa or MasterCard-based products which means they can be used across the world.

The last piece of advice I have is about the physical act of getting your money.

First of all, ATMs are your friends while bureaux de change are generally your enemies, as their rates are often very poor.

So if you are planning to take money out at the airport - whether it is a UK or international airport - head over to the ATM and walk straight past the bureau de change counter.

Second, each time you make a local purchase using your card, make sure you pay in the local currency and not in sterling.

The merchant, whether it is a restaurant, shop or an ATM, might ask you if you want to pay in sterling and your answer should always be: No.

If you do pay in pounds, the merchant will charge you to convert the local currency into sterling and then charge you again to convert back to the local currency.

This process is called dynamic currency conversion (DCC), and in summer 2011 research by Caxton FX found that 37% of Britons were still being bitten by hidden DCC charges.

There is no reason why we should be stung when purchasing travel money.

If people thought about their holiday spending cash earlier, as well as looking at different providers, they might be surprised by how much they could save on their holiday budget.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent, professional advice for your own particular situation.