Planning your holiday money proves worth it

Do not assume that your bank or card provider is offering the best deal. In most cases, holiday money is a way to rip off loyal customers.

It's certainly unwise to rely on one method to pay overseas. Gain flexibility by using all or most of the five money routes: Foreign currency notes; credit card; debit card; pre-paid card; travellers' cheques

It's wise to have a small amount of cash immediately available, not only to pay for snacks and a taxi perhaps but also to cover until a bank can be found.

Many like to take a fair proportion of their spending money in cash although there is the risk of loss with little insurance protection.

In the last few months, the financial turmoil in Greece has caused currency rates to show enormous volatility which makes budgeting difficult. Setting the rate in advance gives certainty. However, look at the total costs involved, not just the rate.

Avoid buying at airport and dock bureaux de change. They know that this is a last-minute purchase and set some of the worst currency rates.

Instead, buy online and have delivered to home or pick-up in branch (such as the Post Office). A few retailers also offer competitive rates in store. Among the most consistently keenly priced are Eurocharge, ICE (International Currency Exchange) and Saga.

Since a debit card is often used to pay for foreign notes, few realise they are about to be stung by their bank. If not buying currency from your own bank, most will impose a deceitful charge even though it is a withdrawal from your own cleared cash.

Two per cent is levied by Alliance & Leicester, Barclays and the Co-op and 1.5 per cent at Lloyds TSB, NatWest, RBS and Santander and all with minimum fees.

However, First Direct, HSBC and Nationwide have a policy of making no charge.

Instead of paying on plastic, a cheque or bank transfer is the method used by Crown Currency Exchange although the order is placed online. The money must reach them within three days.

If ordering online, watch for delivery or handling fees on less than 500, typically 4 to 6. Saga has a helpful lower limit with no delivery charge on orders above 300.

Check, too, if the provider will take back any unused currency and, if so, at what rate. Do not return with coins as usually only notes will be accepted.

If concerned about the risk of fraud when purchasing online, the security checks made by FairFX and Saga impressed Which? in its recent survey. Both providers telephoned after making the order to verify identity.

Use a credit card to buy goods and services abroad. It ensures a far better currency rate (as providers use close to wholesale rates) and is less risky than cash, convenient and provides a record.

However, do not use it for obtaining cash which will typically incur a cash advance fee (typically three per cent), interest which may be up to 30 per cent APR (from the time the money was withdrawn) and a loading fee.

A "foreign usage" charge is imposed by many credit card issuers.

This can amount to 2.99 per cent with AA, American Express, First Direct, HSBC, Marks & Spencer Money, Norwich & Peterborough, Sony and Virgin Money.

Such charges can be avoided by just a few providers. Worldwide, there are no loading fees with the Post Office, Saga or Santander Zero MasterCard and in Europe with Nationwide Visa (and globally one per cent), according to Moneyfacts.

Before using a credit or debit card overseas, it's sensible to inform the provider to avoid any card being blocked.

If you should suffer the loss or theft of a card, take the emergency contact numbers of your issuer and know likely security answers, such as the credit limit. One tip would be to subscribe to a card protection service like York-based CPP which will cancel and re-order replacement cards on your behalf with just one telephone call. It charges 35 per annum or 85 for three years (0844 848 5293).

Pre-paid cards are a great way to budget foreign spending. They are

safer than cash and a handy alternative to travellers' cheques. Use them to withdraw cash and make purchases.

They are available in sterling, euros and United States dollars. Buy in foreign currency so that you know the rate.

Purchase or load at high street banks, post offices and many other retailers. It's possible to pre-load most cards at ATMs, over the internet, via text messaging or by telephone.

Such pre-paid cards are good against fraud and identity theft as they are not linked to your bank account but are PIN-protected. However, unlike credit cards, using a pre-paid gives no protection under the Consumer Credit Act for losses.

Watch for the charges which can quickly mount up: application (often 10), monthly (such as 5), transaction fee (three per cent on each purchase), top-up fee and even an inactivity charge (if not used for say a year).

Withdrawing cash abroad at an ATM is free with both CaxtonFX and Travelex but costs 1.50 euros with FairFX, two per cent with Barclays (minimum 1.50), two euros with Lloyds TSB and Thomas Cook and 2.50 euros with the Post Office.

There may costs for contacting a customer helpline and securing an emergency replacement card which can be up to 35 by courier.

Issuers vary on their foreign exchange mark-up with CaxtonFX imposing 2.5 per cent but none with Travelex or a loading fee.

Travellers' cheques are still widely used. Whilst available in sterling, opt for those in foreign currency as the former incur two sets of charges (for issuing and then converting). Such cheques are safe for if either lost or stolen, they can be replaced. Keep a note of their serial numbers.

Currency by call turns out right for Rhodes traveller

Ruth Wynn, a 79-year-old from Bridlington, goes on holiday each year to a village near Rhodes in Greece.

Recently Ruth discovered she could purchase foreign currency from Marks & Spencer Money by ordering by telephone, charged to her store card with them and have it delivered.

"I obtained a good rate and the transaction was very efficient with the money arriving the next day," says Ruth, who is retired from marketing the tourism aspects of Bridlington.

Her local M&S store does not have a bureau de change and her bank offered an inferior exchange rate. Ruth will not pay for her travel money until she returns as it debited to her M&S credit card. She purchased 700 worth of euros with no delivery charge (over 500).

Holiday money purchases on the M&S credit card are treated as retail spending, not as a cash advance, with 55 days interest-free and no fees.

Ruth enjoys gardening and has two children and two grandchildren.