With the summer holiday season almost here, many of us will sit up into the small hours scouring the internet for the best holiday deal. Pity just as many of us will forget to be frugal when it comes to sourcing holiday cash. And, regardless of whether you choose to use cash or plastic when you are on holiday, that means you'll pay over the odds for that sunset cocktail.
Pick your plastic carefully
Most credit and debit card providers charge customers to use cards abroad. As soon as you buy something you face an exchange loading fee' - a charge for getting sterling electronically converted into a foreign currency. Use your card to withdraw cash from a cash machine and you'll be charged for using an overseas cash machine on top. So make the mistake of buying a £1.50 coffee abroad with a Halifax debit card, for example, and after all the charges it will have cost you £3.04, says Ali Hussain in the Sunday Times.
To avoid these charges you need to get a fee-free card. For several years the go-to credit card has been Nationwide's. However it is now charging a 0.84% fee on credit card purchases which rises to 1% from 1st July.
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So the best credit card to take abroad is Abbey's Zero card. This doesn't charge an exchange loading fee or a separate fee for withdrawing cash from ATMs either here or abroad. But watch out you will be hit with a 27.9% (APR) interest rate on any cash withdrawals you make so reserve it for overseas purchases.
As for debit cards, the Nationwide Flexaccount Visa Debit card is still the cheapest, even though it will charge 0.84% on purchases and cash machine withdrawals in certain countries from 1st June, rising to 1% from 1st July. To check whether your holiday destination is in the charging zone visit Nationwide - Foreign Transactions.
As for withdrawing cash abroad, the Nationwide Flexaccount card is still the best debit card even allowing for charges. But if you want the same convenience without the fees then it may be worth looking into pre-pay cards.
An alternative the pre-pay card
Pre-pay cards can be loaded with cash before you go and then used fee-free once you are on holiday. But be careful as "many have baffling lists of charges, including fees for loading money on to the card, ATM charges and the cost of buying the card in the first place, which can cancel the benefit of free foreign transactions," says The Independent.
The cheapest one is the Caxton FX Global Card, says The Independent, as it has no transactions fees regardless of where you use it, no ATM fees and doesn't charge you to load it up.
Watch out for card blocks
More and more people are having their cards blocked when they are abroad because of their bank's over-zealous fraud prevention systems. Traditionally banks told customers to avoid this by letting them know when they were going abroad. But now many banks say it isn't worth bothering, says Nick Trend in The Daily Telegraph. If, for example, there has been a spate of frauds on British cards in the city you are visiting, the security block may activate anyway.
So don't rely on just one card. Carry a credit and a debit card and if you are travelling with other people make sure they have cards in their own name too. That way you should never be stuck without any access to cash.
Also make sure your bank has your mobile number - most will try to contact you when a block has been put in place and may be able to remove it having spoken to you.
Cut the cost of cash
With a charges minefield to avoid, plus the threat of being cut off by your bank, you might prefer to simply buy your foreign currency here and take it with you. With a little bit of shopping around this can be cheap, albeit not necessarily cheaper. For example, if I withdraw €200 from a cash machine in France today using a Nationwide FlexAccount debit card, it will cost me £176.20. However, order €200 from Travelex - who promise to beat any other rate you find online and the cost is £183.74.
If you still fancy having hard cash in your wallet then make sure you order it in advance. Leave it until the last minute and you risk being punished with miserable exchange rates. Order in advance (as late as the day before departure) from Travelex, for example, and you can collect your cash for free from the airport terminal.
Are traveller's cheques worth the bother?
Traveller's cheques, in any number, are bulky compared to a card and have a distinctly retro air to them. But some people still choose them as it means you can avoid ATM charges, they can be easily replaced if stolen and they are sometimes less of a target for thieves than cash.
Cheques are available in five currencies the Euro, US dollar, Canadian dollar, Australian dollar and Sterling. You can buy them commission-free from Travelex and the Post Office - although the Post Office charges 1.5% commission on sterling traveller's cheques.
The downside is finding somewhere to cash them in when you are on holiday. You may be able to use your hotel's reception. This is usually fine if you are cashing them in for the same currency. But if you want to buy another local currency with them then shop around hotel rates are usually pretty grim.
Overall then it's not difficult to avoid the fees and charges levied on spending money abroad, it just takes a little forward planning.
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Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings and credit cards to pensions, property and pet insurance.
Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.
Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping among many other titles both online and offline.
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