Make the most of holiday money

• The Post Office and Nationwide credit cards offer free purchases abroad.
• Get the best travel insurance deal before you go.
• Get foreign cash before you go - find great deals at First Choice, Travelex and Marks & Spencer.

It's one thing to find the cheapest and cleverest holiday deal on the market (flight, hotel, car-hire all in for a tenner? Well done.) - but it's all too easy to waste that fabulous saving once you get out there. 

Currently we are wasting millions through using the wrong credit cards, getting poor exchange rates on cash and, of course, buying junk once the sun has got to our heads. That last one is probably the toughest to reverse, but at least we can give ourselves a leg-up by getting the first two right.

The best credit cards abroad

Nearly half of holidaymakers are planning to use their credit card to shop abroad this year (that's about £9.4 billion splashed about) but nearly half of them have no idea that most credit cards charge a massive 2.75% fee every time they're used.

It's called 'loading' and the credit card companies do it for no other reason than to make money. I know because I have just asked the head of lending at one financial company. The conversation went like this:

Me: "is there anything that the credit card companies do to justify this fee?"

Him: "in a word - no."

So there you are. It's just another way that the financial institutions bolster their profits. In fact one or two of them are even putting the fee up (look down in shame Morgan Stanley for putting yours up to 3%).

So if you are going to use a credit card abroad and you don't want to be ripped off make sure it is the one that doesn't charge a fee.

Happily, The Post Office has just brought out a new credit card that not only doesn't charge a fee when you use it abroad, it also offers 0% on purchases for the first three months which will seriously reduce your debt headache when you get home. It also offers a 10-month 0% rate on balance transfers.

Nationwide Flex Account holders also get free purchases abroad with their visa debit cards and all Nationwide credit cards offer free purchases abroad as well as no commission when purchasing foreign currency.  They don't offer much in the way of 0% periods, but it's worth taking a look at if you're going abroad. 

If you're over 50 and you are only going to Europe then the Saga card is worth using if you have it already, but as it's only free in Europe it's still not as good as the above cards.

To protect yourself from theft and fraud abroad it could be a good idea to get a pre-paid credit card to take off on your trips with you.  This way if the card gets lost or stolen you can only lose as much as is on the card. Check out our article on prepaid credit cards to see if they are the right thing for you.

Watch out!

Be careful when you're using your credit or debit card - you may be asked if you want to pay in the local currenct or in pounds sterling. This is a service called dynamic currency conversion (DCC) and it's becoming increasingly popular in Europe so there's every chance you will be offered it on this year's holiday.

Basically, if you choose to pay in pounds the retailer will convert your payment instead of your card provider which means they're then free to apply a poor exchange rate and you could end up paying a scary 4% more in extra fees!

So when you use your cards on holiday, incuding getting money from an ATM, always opt for local currency. Your bank may still make you pay a conversion charge but a retailer abroad will probably charge you much more.

The best way to stick to a budget

• ...is only to take cash with you. Leave the credit cards at home (apart from one emergency one which you do NOT touch unless desperate - to get home, not for another bottle of Sangria).
• Work out before you go away how much you can afford to spend while you're out there then take it out in cash (see below for the best places to get it from) and that's all you have while you're there. It's a great way of budgeting because you can physically see it dwindling through the holiday. It really concentrates the mind.
• The only big disadvantage of doing it this way (apart from the fact that it can cramp your style a little if you're in a splurging mood) is that if it gets lost or stolen you have no redress. Once it's gone it's gone. So keep it in the safest place you can and only take some of it out with you each day.
• On the subject of being safe and secure, make sure you get the best travel insurance deal before you go - probably a one-year policy will be the best value if you go away more than twice a year. DON'T get lumbered with the over-priced policy your tour operator will try to sell. There's a lot of competition on the market so shop around online for the best value.

The best foreign money deals

• The last place to consider getting your foreign money from is the airport - they have the worst deals around.
• The second to last place is your tour operator. As with insurance deals, they have the worst offers.
• However, the good news is that most high street outlets don't charge commission on foreign exchange now. So it's possible that your own bank could give you a pretty good deal now, if you can't be bothered shopping around. In fact, many outlets even offer home delivery - often for free.
• Interestingly, according to Which? the best deals when exchanging US dollars can be found at First Choice, Marks & Spencer and HSBC.
• Marks & Spencer also offers free home delivery if you change more than £500 (otherwise it's an extra £5).
• Check out Travelex which has an online guarantee to have the best price on foreign currency.

And if you haven't booked your trip yet, check out and compare some of the latest flights available here and read our full article on cutting your holiday costs.

Get started here

Check out these sites and sign up to save money:

• The Post Office
• Marks & Spencer
• Travelex
• First Choice

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