What card do I take on holiday?

It used to be simple; go to the Post Office change your holiday sterling for the local currency and then head off into the sunshine. Credit cards used to be an emergency measure, an item many would never dream of using abroad.

Not ant more.

Now heading off for a break in the sun means weighing up all the charges of different credit cards and debit cards, along with security to make sure you get the best and safest deal.

Daniel Barnes scratches his head and looks how to spend it on holiday.

The use of cards aboard is growing massively.

Latest figures from payments association Apacs show in 2007, Brits made 309 million transactions abroad - including 240 million purchases and 69 million cash point withdrawals and other cash acquisitions.

This adds up to £25,219 million spent - £18,139 million in purchases and £7,081 million taking cash out; a lot of holiday spending money.

But as we are happily using our cards, we are also happily being charged.

Figures from price comparison site uSwitch show customers using plastic overseas incur an average fee of three per cent.

The average transaction fee on a debit card purchase is now £1.13, while fees for withdrawing cash stand at £401 million annually.

Credit card charges

There is no one story. Each firm has its own charges.

Generally you can find yourself charged for withdrawing cash and using the card, with extra charges for currency conversions - all making snapping up a holiday bargain all seem much more costly.

Most credit cards charge a foreign usage charge - as much as 2.99 per cent - meaning a £50 bargain suddenly costs £51.50. A similar charge is also added for cash withdrawals - so £100 out at the cash machine can cost £105.99.

On top of that cash taken out - either in the UK or abroad - is charged interest straight away, unlike purchases, and the interest rate is higher.

"Taking cash out on your credit card is never advisable even in the UK. Not only is the interest rate much higher than on purchases but you will be charged the interest from day one," says Michelle Slade at Moneyfacts.co.uk.

"On top of this you will be charged a cash handling fee as well as the foreign usage charge if the cash is taken out abroad."

However, some credit cards do not make such charges.

"With Nationwide BS and Thomas Cook Financial Services adding foreign usage charges in the coming months, only the Post Office will make no additional charges for using your card abroad," says Ms Slade.

Andrew Bond at Barclaycard explained the charges for making purchases were cheaper than those at bureaux de change, while the cost of cash advances stood alongside those at bureaux do change.

"It's worth pointing out that the exchange rate customers receive is the commercial rate and not a tourist rate where exchange fees can be blended into the rate offered," he said.

"With the 2.75 per cent fee, customers have transparency to easily calculate what the transaction will cost them. Using your card abroad is the cheapest way to make purchases.

"If customers opt to take cash, there will be an additional charge. This charge is providing access to cash and is made whenever a customer uses their credit card for cash."

Scroll down for all the credit card overseas charges

Many people, however, still opt to use their credit cards - for fears of safety. Knowing if fraudsters get hold of their card details, only their credit limit can be abused and not their current account balance and overdraft limit.

Credit cards also add an extra layer of protection when buying goods - as if the supplier fails to provide the goods or they are faulty, even abroad, then you should be able to get a refund from the credit card company under Section 75 of the Consumer Credit Act. Some debit cards, usually Visa cards, offer this protection - but not all.

Debit card charges

One way of avoiding high credit card charges for using cards abroad - assuming you can't get hold of the Post Office card - is to have a separate account for foreign use.

However, the web of fees charged for foreign use on current accounts can make your head spin.

Scroll down for all the debit card overseas charges

Nationwide customers until recently paid no 'foreign usage loading' fee but the building society is now phasing this out.

Using your debit card can result in foreign transaction fees of around 2.75 per cent, ATM charges as high as two per cent - as well as retail transaction charges.

This means withdrawing £500 cash could cost as much as £21.25 extra - and purchases of £500 could cost up to £15.95 more.

Pre-pay credit cards

A relatively new entrant onto the market is the pre-pay credit card.

Pre-pay cards can be used much like credit cards or debit cards for payments or for withdrawing cash, but the funds loaded onto the cards much like prepay mobile phones.

Charges across different cards vary considerably. Some cards offer the choice between being charged per transaction or paying a set fee a month for usage.

However, the fees can be lower than some credit cards.

Prepay cards can also allow better budgeting - as only cash loaded onto the cards can be spent. Currency rates when buying foreign currencies for the cards also tend to beat bureau de change rates.

Peter Harrison at moneysupermarket.com, said: "If you are stuck with an uncompetitive debit or credit card and don't have time to get a new one, the FairFX and Caxton prepaid foreign currency cards are a good alternative.

"Because they are prepaid and offer no credit facility, these are approved instantly, which is certainly quicker than applying for a new credit card or current account. And if you are worried about overspending on your holiday, prepaid cards will only allow you to spend what is on the card."

What's the best option?

Planning ahead means you will save money.

The general rule of thumb should be; don't use the credit card for withdrawing cash - save it for purchases.

Secondly, use your debit card for cash withdrawals - or purchases, but remember they won't have all the same protection if the goods foul up.

A further area to think about is dynamic currency conversion.

A retailer may politely offer you the chance to pay in sterling, not local currency. However, a nice four per cent fee is also charged for the privilege.

But cards could still end up being cheaper than bad rates at bureau de change, especially those at airports.

Credit card cards for overseas use

	Foreign Usage Charge EU	Foreign Usage Charge Worldwide
Abbey	2.95%	2.95%
Alliance & Leicester	2.99%	2.99%
American Express	2.99%	2.99%
Bank of Scotland	2.95%	2.95%
Barclaycard	2.75%	2.75%
Capital One Bank	2.75%	2.75%
Egg	2.75%	2.75%
Halifax	2.95%	2.95%
HSBC	2.99%	2.99%
Lloyds TSB	2.95%	2.95%
MBNA Europe Bank	2.99%	2.99%
MINT	2.75%	2.75%
Nationwide BS	Nil	Nil (0.84% from 6 May 09, increasing to 1.00% 1 July 09)
NatWest	2.75%	2.75%
Post Office	Nil	Nil
Royal Bank of Scotland	2.75%	2.75%
SAGA	Nil	1.00%
The Co-operative Bank	2.75%	2.75%
Thomas Cook Personal Finance	Nil (2.5% from 18 April 09)	Nil (2.5% from 18 April 09)
Yorkshire Bank	2.95%	2.95%

Source: Moneyfacts.co.uk - 6/04/09
Debit Cards overseas charges

Company	Cash Conversion Charge	Cash Transaction Charge	Retail Conversion Charge	Retail Transaction Charge
Abbey	2.75%	1.5%, min £1.99	2.75%	£1.25
Alliance & Leicester	2.95%	2%, min £2.00	2.95%	Nil
Barclays Bank	2.75%	2%, min £1.50, max £4.50	2.75%	Nil
Coventry BS	Nil	2.00%	Nil	2.00%
Halifax	2.75%	£1.50	2.75%	£1.50
HSBC	2.75%	Nil	2.75%	Nil
Lloyds TSB	2.99%	1.5%, min £2.00, max £4.50	2.99%	£1 (Nil on Premier and Platinum accounts)
Nationwide BS	"Nil (0.84% from 1 June 09, increasing to 1.00% 1 July 09 - Fee not applied in Europe) "	Nil	Nil (0.84% from 1 June 09, increasing to 1.00% 1 July 09 - Fee not applied in selected countries)	Nil
NatWest	2.75%	2%, min £2.00, max £5.00	2.75%	£1.25
Royal Bank of Scotland	2.75%	2%, min £2.00, max £5.00	2.75%	£1.25
The Co-operative Bank	Nil	2%, min £2.00	Nil	2.75%
Yorkshire Bank	Nil	3.75%, min £1.50	Nil	2.75%, min £1.50

Source: Moneyfacts.co.uk - 6/4/09

Be safe

Using cards abroad quick tips, from payments association APACS:

Before you go overseas

• Only take cards with you that you intend to use; leave others in a secure place at home.
  
• Make sure you have your card company's 24-hour contact phone number.
  
• Make sure your card company has up-to-date contact details for you, including a mobile number.
  
• If your cards are registered with a Card Protection Agency, ensure you have their contact number and your policy number with you.

When you are overseas

• Take the same precautions as you would in the UK: look after your cards and card details, and shield your PIN with your free hand when typing it into a keypad in a shop or at a cash machine.
  
• Consider wearing a concealed money belt to keep your cards, cash and traveller's cheques safe.

When you get back

• Check your card statements carefully for unfamiliar transactions.
  
• If there are any, report them to your card company as soon as possible