Published: 15/04/2009

Now that Easter is over, many of us will be looking forward to that well-earned summer holiday in foreign climes.

Whilst planning the annual summer escape, we spend hours scouring the brochures and the web for the best deals on flights, hotels and car hire, but it's surprising how few of us take the same amount of time and effort when it comes to researching our holiday spending money.

With more than 70 million visits overseas by UK residents in the past 12 months, holiday money is, unsurprisingly, a competitive market with a number of options available to leisure and business travellers alike.

Deciding what form of travel money to take

It used to be quite a simple matter of ordering travellers cheques and foreign currency from your local bank branch, with the credit card being tucked in the back of your purse or wallet just in case of emergencies. However with the advent of prepaid cards, debit cards and a growing number of outlets now offering travel facilities, there is now a far wider choice of options available to you.

It's certainly worth shopping around for your Euros and Dollars. Marks and Spencer, HSBC and Nationwide BS have traditionally proved to be very competitive when it comes to buying your foreign currency on the high street, however if you are happy to purchase online and pick your money up at the airport, then Travelex guarantee to be the cheapest.

Beware of the 0% commission currency adverts though, as it is quite rare for commission to be charged on such purchases these days, thus making it even more important to compare costs based on the exchange rate.

Best travel companion - Credit Cards

If you're going to take a credit card with you on your travels, it is worth considering cards from The Post Office or SAGA (Europe only) because, unlike most credit cards, they will not charge foreign loading fees on your transactions overseas.

A word of warning though: if you're considering buying foreign currency with your credit card, it will be subject to a cash advance fee (usually 2% or more) and interest charged at the more expensive cash rate from the date of purchase, even if you pay your credit card statement in full.

If your existing card provider is going to charge you for using your card overseas, it's worth taking out a card from one of the non charging providers above. This is a bit of a 'no brainer' If you're a frequent visitor to the continent, as you could end up saving yourself a small fortune over time, simply by being smarter with your holiday plastic.

Best travel companion - Debit Cards

Charges for credit cards overseas have been well documented, but when it comes to debit cards, some people are still unaware that the free service for transactions that we take for granted in the UK does not extend to the rest of Europe and beyond.

For example, if you're using an ATM to draw cash abroad you'll be stung with a double whammy of between 2.75% and 2.99% of the amount withdrawn (the foreign loading fee) plus a withdrawal charge of between 1.5% and 2%, subject to a minimum of £2 per transaction.

If you used a Halifax debit card to withdraw five separate sums of £100 currency equivalent whilst on your two-week break, it would set you back a total of £21.25 in charges. With Lloyds TSB that figure would rise to £24.95, yet if you used a debit card from Nationwide BS, there is currently no charge (although a 0.84% fee will be introduced from 1 June, rising to 1% from 1 July).

It's not just on cash transactions that you pay these debit card fees. Any purchases you make with your current account plastic will attract the same 2.75% to 2.99% foreign loading fee, plus, in the case of the Lloyds TSB card, you'll pay an additional £1 for each purchase and with Halifax an extra £1.50 per time - ouch!

Prepaid travel cards - the new kid on the block

Pre paid travel cards or "currency cards" often offer more favourable exchange rates and can be charged up with a currency which can then be spent whilst you're away.

They are a great alternative if your credit history prevents you from holding a credit card as they allow you to take money abroad with less risk than taking it in cash. The other bonus is that unlike when changing traveller's cheques, you don't have to show your passport, so you can leave it in the hotel safe for the duration of your holiday.

Currency cards are cheaper than travellers' cheques and lost or stolen cards can be cancelled, with any balance being re-loaded into your bank account.

These cards are ideal for teenagers travelling abroad on school trips as parents can pre load the card with a set amount of spending money, and if the parent holds a second card, they can top up the balance if the child runs out of money or in case of an emergency.

A couple of the most competitive prepaid travel cards on the market at the moment are Caxton FX and Fair FX.

Cancel the papers, the milk......and don't forget to tell your bank

As well as being smart with the type of plastic you take on holiday with you, don't forget to tell your card issuer or bank that you are going away. Otherwise you run the risk of your bank thinking that your card is being used fraudulently because of overseas transactions on your account.

Check out the latest credit card deals at Moneynet.co.uk to help you to make your money go further.