Holiday Money: Mix and match is the flexible way to pay

Simon Read introduces a three-page report on making the most of your cash abroad

Travelling need no longer mean scrambling with some strange local currency. The plastic card explosion has meant that packing your plastic should get you what you want, wherever in the world you are - well almost.

That's not just limited to credit cards; debit cards, as long as they're backed by Visa or Mastercard, are also now welcome around the globe. Relying on credit or debit cards to see you there and back, however, would be unwise.Transaction charges by foreign banks and financial companies can add considerably to your credit statement, and you are always going to need some local change on arrival to pay for a cup of coffee or a taxi from the airport. It is also still possible that there is nowhere at your destination that accepts plastic. Imagine trying to buy some African art from a village hut on credit, for instance. Trying to use plastic in China, too, can present problems.

So mixing and matching your holiday money is essential and travellers' cheques should have an equally important space in your wallet or handbag. But beware of keeping all your holiday money together - tourists are easy prey for pickpockets and bag-snatchers. Separating your plastic from your cash and travellers' cheques should ensure that you also have a back-up if the worst happens.

The priority when travelling is to ensure you have enough money, or at least access to it. Being broke and alone in a strange country can be an unhappy experience, so back-up cash is important.

Once you've decided on the mix of travellers' cheques, plastic and currency, the task is to find the most economic way of creating it. Buying currency can be expensive and if you choose the wrong source it will cost you more than it needs to. Commission at high-street locations ranges from 1 to 1.5 per cent on travellers' cheques, to between 1.5 and 2 per cent for foreign currency. Most sources have a minimum charge which ranges from between pounds 2.50 to pounds 4, so shopping around should save a few pounds. Most banks and building societies offer reasonable charges, but check out other locations such as the Post Office and travel specialists.

A far more secure way of carrying a lot of money is through travellers' cheques. They are easy to change in tourist areas and may even be accepted as cash in some places, such as in the US. Check what commission you may be charged before your change cheques.

Before ordering travellers' cheques, check the preferred currency of your destination - it will normally be either US dollars or sterling.

It is essential to take precautions with travellers' cheques, because they can be used as cash. So keep a separate record of the serial numbers of all cheques and keep a note of the emergency number of the issuer.

Most high-street financial institutions will be able to supply you with travellers' cheques on demand, although if you want other currencies than sterling or US dollars you will normally have a delay of a few days.

While credit and debit cards are, these days, one of the easiest ways of spending abroad, they are not always the cheapest. The exchange rate on credit card transactions is normally better than you'll get if you exchange cash for foreign currency, because the credit card companies can buy in volume and get better rates. But delays in overseas transactions being applied to your account could mean you loseout, or indeed gain, if the exchange rate has risen or fallen since you used your card.

Using plastic to take out cash through an ATM while abroad is simple. Make sure you know the exchange rate so you don't mistakenly withdraw more than your account can stand - and, of course, your PIN. Cash machine withdrawals abroad attract an additional charge of around 1.5 per cent, and it has been known for the local bank to levy a further charge.

A word of warning: if you go over your credit or debit limit while on holiday, your card will be of no use to you other than as a bookmark.

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