Buying Overseas Travel Money: Pound Sterling Below Parity against the Euro and Dollar at the UK's Largest Airport

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Buying currency at UK airports can be excruciatingly expensive, as our recent research reveals a nearl-16% premium is levied on purchases made at bureau de change desks.

Foreign exchange dealers at Heathrow Airport are offering euros and dollars at below parity, despite the spot level in both exchange rates being significantly higher. (Update: See our most recent summer snapshot of holiday money costs here).

As of March 16, the spot rate for converting pounds into euros was quoted at 1.1380, however, Travelex offered a rate of 0.9330.

For converting pounds into dollars, the market exchange rate was at 1.2073 but the retail rate was set at 0.9910 at the Travelex kiosk.

We therefore estimate an approximate 18% premium is being charged by the bureau de change desks. 

Travelex has exclusive rights to selling currency at the UK's largest airport with the rates on offer reflecting the lack of competition in the space.

By way of comparison, competitive online cash and holiday money providers were offering rates of 1.1248 on euros and 1.1933 for dollars.

UK airports typically tender exclusive rights to currency providers for a fixed period following a successful bid.

Travelex signed a contract with Heathrow Airport in March 2015, allowing it to become its first-ever exclusive foreign exchange provider.

Heathrow reportedly told The Moodie Report that Moneycorp - a previous forex provider at the airport - "took the commercial decision not to continue operating at Heathrow."

The sky-high rates on offer reflect, to a great degree, the elevated costs of renting space in an expensive retail location.

However, a lack of competition also means the margin charged on foreign exchange can be elevated far beyond the market price.

For travellers, the rates underpin why planning holiday money purchases ahead of time saves significant amounts of money.

For comparison, the other major currencies on offer were going at the following rates:

» The Swiss franc was going for 0.8820 to the pound (spot: 1.1223).
» The Polish Zloty 3.9650 to the pound (spot: 5.360).
» The Qatari Riyal 3.389 to the pound (spot: 4.3914).
» The Swedish Krona 9.760 to the pound (spot: 12.7780).
» Turkish Lira 16.594 to the pound (spot: 22.923).
» Indian Rupee 77.174 to the pound (spot: 99.798).

Travelex does however offer buyers the chance to purchase currency online for collection at the airport, and the rates on offer are far more competitive than those quoted when buying on the spot.

The margin on GBP/EUR and GBP/USD ordered in advance appears to be set at just over 2.0%.

This contrasts with the ~18% the company charges those who turn up to their desks at the airport on the day.