If you are planning to go abroad this summer and don't want to pay over the odds for your spending, you need to start thinking about it now.

NAOMI CAINE
 

If you are planning to go abroad this summer and don’t want to pay over the odds for your spending, you need to start thinking about it now.

Taking plastic is safer and more convenient than carrying large amounts of cash, but making the wrong choice of card can add significantly to the cost of your holiday.

According to uSwitch.com, British holidaymakers waste more than £300 million every summer on unnecessary overseas credit and debit card fees.

If your existing cards are among those with high charges and you want to apply for alternatives, it is time to act, as the process can take several weeks.

The majority of credit and debit cards add exchange commission of around 2.75 per cent to overseas transactions. Many debit cards also charge up to £1.50 each time they are used to make a purchase.

This means a £100 credit card spend typically costs £102.75 before any interest is added, while the same purchase made with a debit card could cost £104.25.

Withdrawing cash overseas is even more expensive, as most cards levy a handling fee of 2 to 3 per cent on top of the exchange commission.

As a result, £100 taken out with a debit card could cost £105.75. In addition, credit cards charge interest on cash withdrawals, usually far in excess of their purchase rate, and there is no interest-free period, so it starts as soon as the money is out of the machine.

But you can use plastic abroad without paying through the nose. The simple rule is to take a low-cost credit card for purchases and a cheap debit card to access cash, or to opt for a market leading prepaid currency card.

Comparison service Moneyfacts.co.uk says the Halifax Clarity MasterCard is one of the best credit cards for overseas use, as it doesn't add exchange commission or cash handling fees.

For most successful applicants, the annual percentage rate of interest (APR) on purchases and withdrawals will be a below average 12.9 per cent. However, unlike many other cards, Clarity doesn't have an extended free period for purchases. This means anyone who doesn't clear their balance when it becomes due will be charged.

Those aged 50 and over might be better with Saga's Platinum Visa card, which charges no exchange commission, has an APR of 11.9 per cent and a nine-month interest-free purchase window. However, cash withdrawals attract a handling fee of 2 per cent and an APR of 21.47 per cent.

For those under 50 who don't always clear their bill, David Mann, money expert at uSwitch.com, recommends Nationwide's Select Visa card, which has a typical APR of 15.9 per cent for purchases and 27.9 per cent for cash.

He said: "It doesn't charge any fees for transactions or overseas usage, and comes with 15 months of zero per cent on purchases - though you have to be a Nationwide customer."

Select's fee for overseas cash withdrawals is 2.5 per cent (minimum £3), but on the accompanying debit card they cost only £1.

For those who want time to pay off their spending but don't want a Nationwide account, Mr Mann likes the Post Office's Platinum MasterCard.

He said: "It also offers no mark-up on foreign currency transactions worldwide. For anyone not wanting different cards for home and away, this also offers zero per cent on balance transfers for 18 months with a reasonable 0.79 per cent transfer fee.

"However, it won't give you an introductory interest-free period on purchases and it has a slightly higher APR (17.8 per cent)."

Frequent travellers could consider the Lloyds Bank Avios reward scheme, which comes with a MasterCard and an Amex card, both of which allow you to collect Avios points to spend on flights and hotels. There are no foreign transaction fees, but the scheme costs £24 a year and the APR is a relatively high 23.7 per cent.

Anyone with a less than perfect credit rating is unlikely to be accepted for the cheapest cards, but they may be eligible for the NewDay Aqua Advance MasterCard. There are no foreign transaction fees, but the maximum credit limit is usually £1,200, and the APR is a massive 34.9 per cent, so it is important to pay it off each month.

To find out how much you will pay for debit card withdrawals, check with your provider. If you are unhappy with the answer, consider a prepaid currency card instead. You load these before leaving home and use them just like a credit or debit card until the money runs out.

Look on financial comparison sites for one with no transaction fees and the lowest combination of charges for set up, foreign exchange and cash withdrawals for your likely spending pattern.

The My Travel Cash and Ukash Travel Money euro and dollar cards have no initial fee and charge nothing for transactions or withdrawals.

Whatever card you choose to use, if the retailer offers the option of paying in sterling, refuse, as you will be charged a worse exchange rate for the privilege. Some businesses apply this dynamic currency conversion automatically, so if they don't mention it, ask them not to and check your bill before paying.

It is always wise to take some cash for small purchases, but don't use airport or ferry bureaux de change, as the rates are always poor. And don't pay with a credit card, as this will count as a withdrawal and start attracting interest right away.