Plastic abroad: How to spend it this summer
Taking a debit or credit card abroad may seem a safer and more convenient alternative to cash on holiday but anyone who has been stung by a cash machine charge before will be understandably reluctant to pack their plastic.
Buying lots of currency in advance certainly has its advantages - there are no bills, you can fix a budget, and you don't have to worry about fraud or losing your card.
But on the other hand, if all your money is stolen there is really very little that you can do about it, and this is where a card becomes more appealing.
There is no need to resign yourself to high charges, however. Sarah Routledge rounds up the best cards to take with you on holiday this summer.
What charges?
Obviously it makes sense to take a back-up to cash. This could be in the form of travellers' cheques, pre-paid cards, credit cards, debit cards, or a mixture of any of these.
The easiest way is to take the debit or credit card you already own, but using your card could cost more than you expect.
If you use your card to pay for a meal, for example, it will usually be subject to a 'loading' charge, or exchange rate commission fee, which is usually around 2.75 per cent, as the provider charges to exchange sterling into foreign currency.
On top of this, if you are using your debit card, you may also have to pay a 'purchase fee' - normally flat-rate charges, typically between £1.25 and £1.75 per transaction, although some are charged at a percentage rate - typically 2.75 per cent, and subject to a minimum fee.
In addition, some retailers will offer to convert your bill into pounds - useful if you want to know exactly what you have paid for that meal - and this is known as 'dynamic currency conversion'.
But the retailer will apply a higher exchange rate for this service, so suddenly the meal becomes more expensive by around three or four per cent. And you might not always be asked - so check what currency the bill is in before you sign or enter your PIN. If it is in sterling, ask for it in the local currency.
If you want to avoid these charges, and head to a cash machine, you are going to be charged yet again.
Withdrawal fees from overseas cash machines are usually charged at around two per cent of the withdrawal amount, or a minimum of £2 by your card company and many overseas banks will also charge you a fee for the use of their cash machines.
If you use your credit card for taking out cash from an ATM, you will get the double whammy of being charged for a cash advance and paying interest on the amount the instant the withdrawal is made.
Consumers using their plastic overseas add £754 million in charges to their final bill, according to uSwitch.com.
Louise Bond, spokesperson for uSwitch, says: "To avoid any unwelcome doormat surprises in their credit card or bank statements upon their return home, any consumer who holds a debit or credit card should research foreign usage charges thoroughly before they leave so they can make informed decisions about how best to manage their holiday expenditure."
Best cards
"In terms of withdrawing cash from the ATM, there is only one - the Nationwide debit card," says Peter Harrison, head of travel money at. Moneysupermarket.com.
Nationwide charges nothing for cash machine withdrawals or purchases in Europe, although it now charges 0.84 per cent for using an ATM in countries outside Europe - a full list of countries where the charge applies can be seen on the building society's website.
Of course, if you want to the Nationwide debit card, you will need a Nationwide bank account - certainly something to consider if you travel often, but it may be easier to apply for a credit card instead.
"In terms of purchasing, there are a couple of cards that offer protection but don't charge you," Mr Harrison adds.
The Santander Zero card has no foreign exchange loading fee anywhere in the world, and also benefits from the very competitive wholesale exchange rate that both MasterCard and Visa offer.
There is also no fee with withdrawing cash from an ATM, but bear in mind if you withdraw cash in this way you will be paying interest immediately - and at 27.9 per cent.
The Post Office offers a similar fee-free card for making purchases, although there is a 2.5 per cent fee charged on withdrawals (and these will also attract a high rate of interest).
Pre-paid
Relatively new, but growing in popularity, pre-paid cards are an alternative to using a credit or debit card abroad and are seen as a direct replacement for travellers cheques.
Much like a mobile phone, you load a card with currency before you head off on holiday, and these can then be used for cash machine withdrawals and for transactions, in the same way as a credit or debit card.
There are several advantages to using a prepaid card, however.
As you load the card in advance, it is much easier to budget for your holiday than taking a credit card, which could lead to a nasty surprise once the holiday is over if you over-indulge.
On the other hand, they can always be topped up if you need a little more.
And the charges are also clearer - with many cards, there are no fees to load the card, no transaction charges and with some, no cash machine withdrawal charges.
A lost or stolen card can also be replaced, unlike cash, and as there are limited funds available on the card, you do not have to worry about identity theft.
"In some cases they even offer a better exchange rate," Mr Harrison adds.
However, bear in mind pre-paid cards do not have the advantage of protecting you for purchases over £100, as a credit card would.
Travelex's Cash Passport is available in seven currencies, has no charges for loading the card, topping it up or using it to make purchases abroad.
Travelex also offers a free second card and emergency card replacement while you are away.
However, there is a $4.50/?3.75/£2.50 charge for using it to withdraw cash at an ATM.
FairFX also offers a currency card, available in dollars or euros, and costs £9.95 to buy - although it is free through moneysupermarket.com.
The charge for withdrawing cash at ATMs in the Eurozone is lower, at ?1.50, and there is no charge for purchases.
Meanwhile, the Caxton FX Card guarantees the best exchange rate on the day, and in addition to no purchase fees, the Global Card does not charge for using ATMs outside the UK.
You have to load a minimum of £100 to use the Global Traveller, however.
If you want to get back any leftover cash at the end of your holiday, these cards can be used in UK ATMs, at a small charge, or you can opt to 'cash out' the card - although this will be subject to a larger fee.
A word of warning - if you use pre-paid cards as a deposit against a hire car or a hotel, for example, the amount will be unavailable to use for around 30 days, unlike a credit card. And some overseas automated petrol stations operate a similar policy, taking a security deposit which is later returned - but this can take up to 15 days.
In other words, where a deposit is likely to be needed, use your credit card.
You should also be aware that the money held on the card is not covered under the Financial Services Compensation Scheme, and in the event the bank used by the card provider becomes insolvent, your money will be at risk.
Mix it up
Given that each have their advantages and drawbacks, it would be sensible to take a mixture of cash and cards on holiday: cash for small transactions, a prepaid card or travellers' cheques, plus a credit card for times when a deposit is required or for larger transactions when you want the extra protection.
"By doing some research, and this could be as simple as booking your money online before picking it up at the airport, you will be able to get a better deal," says Mr Harrison.
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