Foreign Perspectives

With the Winter upon us people divide into the cold and the warm holiday camps whenever ideas for Winter holidays come up.

Although the Summer is obviously the peak time for warm holidays, there are loads of warm holiday destinations available all year. For one thing, when it’s Winter in the northern hemisphere, its Summer in the southern hemisphere so you can always go to the Summer no matter what month it is.

But, of course, changing hemispheres is pretty expensive in terms of flights and whatnot which takes that out as a viable option for most people, or at least as a regular holiday option. Still, that leaves you with lots of choice of warm, albeit not hot, holiday destinations that are fairly cheap to get to.

For example, southern Spain is still in Summer temperatures even in December. In fact, it’s a much better time to visit southern Spain than in the peak of Summer as the majority of the tourists have gone home so you’re not fighting to get accommodation and the traffic on the roads is considerably less hectic than it is during July and August. Right now Stansted to Valencia can be done for under £30 return, including taxes.

Further south brings in more exotic options for your such as Morocco or Tunisia which combine Winter warmth with a more exotic culture and they’re both fairly cheap places in which to stay.

For all of these, I find that one of the best ways to skim through the options is via SkyScanner which can pull up all kinds of interesting locations that you wouldn’t normally think of.

I was leafing through the categories and funnily enough though I write a fair bit about both holidays and finance I don’t think I’ve ever written something that covers both!

So, with the Christmas holiday season coming up, how were you planning on financing the holiday? Christmas is perhaps the worst holiday to finance as you can have a “worst-case” scenario in terms of finance with the potential for both Christmas presents and a foreign holiday which makes for quite a big bill for some people.

In an ideal world, you’d have saved up for it all months in advance, but then this isn’t an ideal world, is it? Therefore many people are looking to borrow money to finance it all.

Fortunately, many people are in the same boat and therefore there are lots of offers of credit around at this time of year. As a rule, avoid store credit for the presents as this is often the most expensive form of credit and instead look towards the banks. If you’ve not used up all the 0% card offers, this is the time to get filling in the appropriate application forms which can get you up to 9 months interest free credit on purchases and, if you’re lucky enough, you might be able to finance both the Christmas presents and the holiday with one of these cards.

One thing to avoid though is the head in the sand approach that many people take. That attitude will almost certainly cost you dear and you’ll end up paying way over the odds for your borrowing. Even if you can’t get 0%, at least check what interest you’re paying on your credit cards and use the one with the lowest rate to buy whatever needs bought.

When you look around in a new country you generally bring all your preconceptions as to what a bank is with you.

Typically, the assumption is that a financial organisation is a bank if it issues credit cards, debit cards and cheque books whereas it’s a building society if it largely confines itself to savings accounts and mortgages. Of course, in many countries such distinctions don’t exist 100% of the time and there’s usually something of a graduated scale between building society and bank in most countries these days.

In fact, a more realistic distinction these days is probably based on size (however that might be measured) and perhaps the extent of international activities. So, for example, although most people would call the likes of the Halifax in the UK a building society in fact in both legal and practical terms it has been a bank for many years. For example, it has been issuing cheque books since the 1970s if not before and has had international activities for a substantial time too.

On the other hand, the various Credit Agricoles in France are clearly in the building society camp. Yes, they issue cheque books but their debit cards aren’t run by themselves and their international activities are nil, at least as far as the regional Credit Agricoles go.

Spain by contrast has the fairly substantial La Caixa which is a savings bank in name only although with few international activities up to now.

Some of the links that come up on websites are pretty peculiar, don’t you think?

Now, I can understand where they’re coming from when a google ad appears on the blog that’s related to France. After all, I have written a fair amount about France in the past. But hold on: since I’m not writing much about it now, how come google is putting ads on the site that relate to France so often? It shouldn’t be what I wrote about in the past that’s relevant but what’s on the page with the ad right now. Except that often it isn’t.

In a similar vein, the pages being picked up by Reuters are something of a mystery. They’re using some variant of a keyword sieve to select the articles so it’s understandable that my article titled As seen on Reuters is the most “popular”. Similarly those with financial type words in the title have been picked up too, or at least some of them have. Trying to work out what they are looking for will while away many an hour over the Winter I expect.

And then there’s the people who have selected this blog to advertise on. Goodness knows what they are looking for as it’s a complete mystery to me!

Not so long ago there were all kinds of restrictions on transferring money abroad due to currency controls that lots of countries had in place. They’re almost all gone now and it has become more of a natural thing for “ordinary people” to need to transfer money abroad.

Most of the time it’s due to holidays, of course, but an increasing number of us are becoming small scale international jet setters with homes in more than one country and with both of those come a need to transfer money abroad.

Holidays usually involve a different category of currency conversion in that you are on the spot when you need the money, the amounts involved are smaller and you probably don’t have a local bank account. However, whilst the amounts may be smaller individually, added up over the years they will come to quite a hefty sum. Also, many of those who holiday in the same country each year may be considering the purchase of a property there and so have that local account too.

Most people ignore the costs of all those international transactions to their detriment. One friend of mine found that almost 10% of his entire salary was going in such bank charges simply because he was living abroad and using his “home” account in exactly the same way that he always had ie lifting small amounts frequently.

Saving money on those transactions is usually fairly easy. If you don’t want to change your bank, check out exactly how they charge for use of credit, debit and cash cards abroad. You will usually find that debit and cash cards are more economic ways of getting cash than credit cards are in that you won’t be paying interest on the money. However, that’s not to say that they are cheap. Typically a withdrawal of £100 in the local currency will cost you £4 to £5 but note that this includes a fixed transaction charge so withdrawing £20 will cost you around £2 ie 10% whereas £200 would be about £7 ie 3.5%. You can eliminate these charges altogether if you use the UKs Nationwide Flexaccount as it has neither transaction fees nor foreign exchange charges.

It’s slightly better if you buy things, usually. Using a typical Mastercard or Visa card will only incur the foreign exchange charge ie buying £100 of goods will cost you £2.75 and that £20 item would be 70p. Therefore you should buy things with the card directly rather than lifting the cash to pay for them.

What about larger amounts ie if you’re living abroad or have a holiday home abroad? Well, if you follow our advice and get the Nationwide Flexaccount you can lift £500 per day which means that it’s quite viable to use that card in conjunction with a local bank account to transfer amounts equivalent to several thousand pounds. You certainly couldn’t buy a house in that way but it’s enough to fund the payments for electicity bills and the like.

If you are talking thousands, then the usual way is to ask your bank to do a SWIFT transfer. This will cost around £25 plus there’s a currency exchange charge (which isn’t widely available). However, that too can be eliminated in some circumstances. For example, if you bank with HSBC then you can do free transfers to an HSBC account elsewhere in the world but the HSBC Premier account that you need to avail of this costs £20/month (unless you have £50,000 or more on deposit with them) so it’s not as useful as it first appears. However, if you are buying in Spain, the Halifax run to a free account which offers free transfers from Halifax UK accounts to Halifax Spain ones. What’s less obvious is that this route gives you a pretty much free way from pounds sterling to euros anywhere in Europe as banks are required to transfer euros at the same level of charges in other European countries as they do domestically ie to get euros in an account in France, you could transfer from the Halifax UK to Halifax Spain and from there to a French bank.

Other options include the use of the specialised money transfer services such as HiFX (there are lots of similar services around.