Your Money: Sun, sea and flexible friends

The growing appeal of plastic could spell the end for the trusty travellers' cheque, writes Steve Lodge

Wads of travellers' cheques and pocketfuls of local currency are becoming less of a requirement for people travelling abroad. A report to be published shortly by Mintel, the market researchers, highlights the increasing acceptability of cashpoint and debit cards overseas. It also shows that credit cards are used for more of Britons' total holiday spending overseas than travellers' cheques.

Some 60 per cent of holidaymakers still take travellers' cheques, says Tourists and their Money. But the number is decreasing, with the trend towards a greater reliance on debit and credit cards.

Brits are more aware of the range of plastic they can use abroad. They appreciate the convenience and are coming to realise that the charges and exchange rates can compare reasonably with those for travellers' cheques and bureaux de change.

A report by Which? magazine in June gave the cost of changing pounds 500 into foreign currency in the UK as around pounds 528, while to withdraw the cash abroad using a credit or cashpoint card might cost pounds 516. Spending the same pounds 500 on a credit or debit card could cost around pounds 511. Just buying pounds 500 of foreign currency travellers' cheques would cost pounds 528, says Which? and there may be charges when spending them or turning them into cash.

The cost comparisons are not clear-cut however - not least because the cost of using plastic depends on different issuers. Even Gert Van de Klashorst, manager of debit products at Europay International which, with MasterCard, runs the Cirrus cashpoint and Maestro debit systems, prefers to emphasise the convenience rather than the financial advantages.

Plastic is safer to carry than cash - even though it does not offer as secure a safety net as travellers' cheques (try getting a replacement cashpoint card when you're on holiday abroad). Mr Van de Klashorst says the growth in plastic transactions shows how much consumers value the facilities. Cashpoint withdrawals are by far the fastest growth area. The amount of money withdrawn from foreign cashpoints has increased more than six-fold in four years, while more than pounds 1bn may be spent abroad on debit cards this year, according to Mintel.

Using your credit card abroad is fairly straightforward - simply look for the Visa or MasterCard (MasterCard now owns Access) logos in outlets or on cash machines. Debit and cashpoint cards that can be used abroad will often carry special international symbols.

Cirrus is a cashpoint system run by MasterCard and available on cards from NatWest, Midland, First Direct and Royal Bank of Scotland. Maestro is the equivalent debit system. Compatible machines will carry the symbols. Visa Delta is the other main debit symbol to look for on cards, although some Visa Delta cards have their own bank's brand name such as Connect. These Visa-linked cards can be used in machines carrying the recognised Visa symbol.

Not all banks automatically issue internationally-compatible cards, so you may need to ask: there is generally no charge for making your card international.Europay International says there are 128,000 cashpoint machines that will take Cirrus cards in Europe and about the same number in the US, which compares with around 7,000 cashpoint machines available to NatWest customers in the UK. The further you go off the beaten track the less likely you are to find an outlet to take your card. Visa has published Holiday Money 1996, which gives information on cashpoints that accept Visa cards in 10 popular holiday destinations (call 0800 10 60 76).

It is worth having at least some hard cash for when you arrive. That said, if you are going for, say, a weekend in Paris it is perfectly possible to rely heavily on your plastic. There should be no transaction charge for using a credit card. But each card can load the underlying "wholesale" exchange rate by up to 3 per cent. This should still be cheaper than using travellers' cheques or getting hold of foreign currency, but the loading varies. Frizzell Bank, based in Bournemouth, offers a credit card with no loading aimed particularly at people who travel abroad a lot. But the card has an annual fee of pounds 10. Among the mainstream banks, Lloyds is thought to have the lowest loading - of 2 per cent.

Using a credit card to get cash might seem like an expensive luxury for emergencies only. But contrary to popular belief, most cards do not charge interest on cash withdrawals, assuming you pay off the bill in full each month. As well as the exchange rate loading there is normally a handling fee of 1.5 to 2 per cent, with a minimum charge of pounds 1.

Debit and cashpoint cards tend to work in a similar way - loading the exchange rate and making an administrative charge. Loadings are typically 2 to 2.5 per cent, handling charges around 1 to 2 per cent. Banks are poor at disclosing these deductions and they will not be spelt out at cashpoint terminals. Mark Austin of RBS Advanta, a credit card company, says there is not much competition on charges, and this can bring unexpected differences. First Direct has a 2.25 per cent rate loading and 2 per cent administration charge on Cirrus and Maestro transactions. NatWest claims it makes no rate loading, just an all-inclusive charge of 2.25 per cent.

Mintel forecasts a continuing decline in travellers' cheques as consumers become more comfortable using plastic and as access increases. But arguably some people are already too comfortable. Young holidaymakers in Spain are already "abusing" the all too conveniently located cashpoint machines in many tourist resorts and then coming home to a plastic hangover, it says.