Hidden costs of plastic

WE ALL know the mantra: tickets, passport, money. These are the vital ingredients for a holiday abroad, and the banks, building societies and bureaux de change have been earning nicely from travellers' need for foreign money for many years.

But there are already more than 1 billion automatic teller machines (ATMs) around the world that accept credit and debit cards. So should you just take your plastic on holiday?

It is tempting to leave financial arrangements until you arrive at your destination, but you can run into problems. ATMs break down and run out of money. You may also have to travel to an ATM once you reach your destination.

Even if you avoid technical problems, plastic withdrawals can be dear. Credit-card withdrawals are subject to a withdrawal fee or handling charge, plus "foreign loading" - the charge made for allowing you to obtain money abroad.

Foreign loading on Visa credit cards ranges from 1.25 per cent to 2.75 per cent. MasterCard doesn't charge foreign loading but most MasterCard issuers do, and again this ranges from 1.5 per cent to 2.75 per cent.

On top of that, both MasterCard and Visa charge withdrawal fees and handling charges from 1.5 per cent to 2.75 per cent. If you withdraw pounds 200 on a Lloyds Bank MasterCard, for example, it will cost you 1.5 per cent withdrawal fee plus 2.5 per cent foreign loading. That's a total of pounds 8 for the transaction before you start paying interest on the advance, and the interest charged for cash advances is higher than for purchases made on your card.

Debit cards represent slightly better value because you're taking money directly from your bank account, so there's no interest to pay. But there is still a withdrawal fee and foreign loading. This could work out quite costly if you make several withdrawals.

The cheapest credit cards for money advances are Northern Bank MasterCard or Classic Visa, which don't charge handling fees, and Clydesdale MasterCard and Woolwich Visa or Mastercard, which don't charge foreign loading. The best value debit cards are NatWest Cirrus, Abbey National Visa and Bank of Scotland Visa.

But if you're not already a holder of one of these cards you're unlikely to apply for one just to use on your holiday. It makes more sense to hunt down the cheapest providers of foreign currency and traveller's cheques (see table). One of the best deals is British Airways' joint venture with Travelex bureaux de change.

What if the worst happens? If your Visa credit or debit card is lost or stolen, you need to contact your card issuer to put a stop on your card. There is a list of card issuers' numbers in the Visa Holiday Money guide, free on 0171-231 5432. For MasterCard, Maestro and Cirrus you also have to notify your card issuer, so remember to make a note of its number before you leave on holiday.

q Kathleen Hennessy is assistant editor of 'Moneywise' magazine.

Holiday money

Cheapest currency providers

Provider Commission Handling Charge Total cost

for pounds 500

American Express pounds 3 None pounds 3

Bank of Ireland 0.2% min pounds 3 None pounds 3

British Airways* 0.75% min pounds 1.25 None pounds 3.75

*only for BA customers

Cheapest traveller's cheques

Provider Buying commission Total cost of Selling back

sterling cheques pounds 500 worth of commission cheques

British Airways* None pounds 1.25 None

American Express 1% pounds 5 None

Thomas Cook Direct None pounds 5 None

*only for BA customers