More mileage for your travel cash

HOLIDAY MONEY Passport ... ticket ... foreign money ... insurance ... car cover. Here and on page 12 we show how to get a good deal; What's the best way to pay?
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The Independent Online
Traveller's cheques have been around for more than 100 years. First produced by American Express in 1891 as a secure means of transporting money, they are still recommended for their combination of widespread acceptability and security. But paying by credit card is cheaper, and using plastic to withdraw cash overseas is an increasingly popular option.

However, even if you have an arm of plastic and a wad of traveller's cheques, it is worth having some cash available for when you arrive in a foreign country - say, to pay for a drink or taxi to a hotel. The trouble with cash is lack of security, so experts recommend that your foreign cash be limited to what you are likely to need on arrival.

Plastic is easy to use and offers keener exchange rates than traveller's cheques or buying cash at bureaux de change or banks, but it's of little use if no one accepts your card. And if you want to use a card to withdraw cash, that might be easy in Paris or Frankfurt, but another story altogether on an exotic island.

Traveller's cheques, by comparison, can be exchanged in any number of banks, hotels and many shops. However, the convenience may be countered by swingeing costs on exchange rates and transaction fees. It may be more cost-effective to seek out a bank, but remember you will need a passport to change money.

Traveller's cheques do have two other big advantages: they can be replaced in hours should a holidaymaker suffer loss or theft; and, because they have to be bought before you go away, there is an in-built budgeting discipline to avoid spending money you haven't got.

Plastic cards are an essential standby, but better used for unplanned purchases such as a good dinner on the last night, or in an emergency.

Traveller's cheques and foreign currency mean tourist exchange rates and, often, additional commission. With card purchases there is no commission and you will normally get a "better than tourist" exchange rate - closer to that quoted in international money markets.

There are innovations which combine the benefits of plastic's superior exchange rates with the "budgeting" aspects of traveller's cheques.

Visa is piloting TravelMoney, a pre-paid card which is "loaded" with as much money as you require - rather like a phone card - and can be used to withdraw cash at any of Visa's 250,000 holes in the wall around the world. Consumers can only obtain TravelMoney cards through Bank of Scotland at the moment, although the plan is to make them more widely available.

But for now the knowledge that traveller's cheques cannot disappear into a wall thousands of miles from home may be enough to persuade many people that commission of 1 per cent to 1.5 per cent is a price worth paying for security. Credit and debit cards have also suffered in the past from being "cloned". This is the practice whereby details stored on the magnetic strip are copied while the card is out of your sight, perhaps in a restaurant, to be used to debit your account subsequently.

Your travel agent should be able to advise on the best currencies in which to denominate traveller's cheques. Sterling is often as good as any for much of Europe, although American Express differs from some providers in specifically recommending you take the currency of the country you are heading for. Certainly, the dollar is king in the US; turn up with sterling and expect laughter.

In fact, in the US, dollar traveller's cheques are accepted as cash in shops and restaurants, so the hassle of turning them into dollar bills can be largely removed. The US is also the land of plastic. Cards are vital for confirming your credit status, and you'll have to present some plastic before you are allowed to set foot in a hotel bedroom. And if you try to hire a car without a card, forget it.