Update, Tuesday 5 July: This trick still works but the Brexit vote led to many currency firms watering down the gain. The text below is as first published on 21 June so for the latest firm-by-firm info see our Travel Money Tips guide.
The EU referendum’s on Thursday and we’ve been swamped with people asking: “Should I buy currency before then, will the pound collapse if there’s an ‘out’ vote?”
We don’t know the answer, but markets hate uncertainty, and if there is an out vote, it isn’t controversial to say the pound is likely to weaken. You can see more on this in Martin’s Should I buy euros now? blog from last week.
So we’ve come up with a system, if you’ve got a summer holiday planned, to buy euros, dollars or any currency and ensure whatever happens you get a good rate, for a small cost.
Just order for collection with a firm that allows you to cancel an order for a full refund of whatever you paid in sterling. Say you paid £500 today for €640ish, if you cancel, you’d get your £500 back whatever the exchange rate at the time of cancelling.
You can even order for collection up to two months away, though don’t leave it until the last 24 hours to cancel as then there can be fees. One firm allows you to use this system on deliveries too, but the rules there are tighter.
How you win using the system
Buying now means you’ve locked in today’s rate, which protects you if the pound falls in value. But if it rises – meaning your pounds get you more euros/dollars/etc – you’ve a get-out clause, allowing you to cancel, get a refund and buy again at a better rate.
We’ve run the rule on a host of banks’ and currency firms’ terms and conditions. The following three have all confirmed in writing they allow cancellation of an order for a full refund, with the following conditions:
- Sainsbury’s Bank* – collection only. You can order online or by phone for collection up to 30 days away, and cancel any time up to 24 hours before collection for free. If within 24 hours you pay a £10 fee. Update, Wed 22 June, 12.50pm: Sainsbury’s Bank’s confirmed this policy is definitely in place despite its website stating the £10 charge applies regardless of when you cancel. The bank has decided to waive the charge on cancellations made more than 24 hours ahead if you order currency before the end of June. If you are wrongly charged you can call it on 0345 301 2724 for a refund.
- Travelex* – collection only. You can order online or by phone for collection up to 60 days away and cancel any time up to 24 hours before collection for free. If within 24 hours you pay a £10 fee.
- Post Office* – collection or delivery. You can order online for collection or delivery up to a week away and cancel any time if for collection. For delivery, you must cancel before the money is dispatched for delivery (as it’s never 100% clear when that’ll happen it’s safer via collection). It says it reserves the right to charge a £20 cancellation fee but insists it doesn’t always levy it.
The best thing to do is go to our TravelMoneyMax comparison tool to find the best rates of these three for the amount you’re buying. As you do that you’ll see there are usually other bureaux giving marginally better rates – and this difference is the price you pay for the certainty.
Things to watch out for
As with anything there are always some risks:
- The most important thing to be aware of is if you’ve paid for currency, but not collected it, and the bureau goes bust, you’ve little protection and would likely lose your cash. So letting it hold onto the cash for too long is never a good idea. However the firms we’ve listed are big names, which gives some comfort, but there are no guarantees.
- Travel money firms tend to have clauses that state they reserve the right to cancel orders due to “extreme currency fluctuations”. The Post Office has this term but states it’s “never been invoked”. The clause is to protect firms so they don’t lose serious cash if currencies move against them. If a Brexit causes the pound to dip by such an extent that it causes them hardship, there’s a risk they could cancel orders, but it appears unlikely from what we’ve been told. Though there are no guarantees. If they cancelled your order, you’d get your money back in full.
- It’s best to pay for currency by debit card, as paying on credit card means high charges; see our Buying currency on credit card warning.
- There’s always a risk these policies will be suspended. The three firms say they’ve no plans to, though you never know.
Can’t collect from these bureaux or want to avoid these risks
A couple of firms allow you to pay a £4-£5 fee that gives you the option to sell your currency back to them for a full refund of what you paid in pounds.
You need to pay this fee – called a ‘buy back guarantee’ – when ordering your money, not after.
- Caxton FX* – £4.99 fee, on its prepaid card only. You can only purchase the guarantee via its website, not its app. The card can take three to five working days to arrive, though you can load cash to your account online instantly. To get the guarantee, you must sell the money back within 90 days of buying, or 30 days from first purchase on the card after buying the currency, whichever is sooner.
- Travelex* – £3.99 fee. To sell the money back for a full refund, you’ve 45 days from date of collection in store or from the date of ordering if it’s delivered.
Thanks to Rosie Bannister for doing the hardcore number-crunching on this.