Which is the perfect card for your wallet when you're out of the country and which should you be leaving at home?
If you're travelling overseas on holiday or business, there's no need to go through the hassle of arranging travellers' cheques or changing lots of money before you go. Nowadays, all you need to do is arm yourself with the right set of plastic in your wallet.
But every bank charges different amounts for using your debit or credit card overseas, and the cost isn't always as clear as it should be. Here are five things to think about if you're heading abroad.
How much does your bank charge?
If you're with a bank that has reasonable charges, using your UK debit card is one of the simplest ways to manage your money overseas. Norwich & Peterborough Building Society and Metrobank both offer bank accounts which don't charge you for using your debit card at the till or at the cash machine
At the other end of the scale, Halifax will charge you 2.75% of the transaction value, plus an extra £1.50 when you use a debit card abroad.
If you travel on a regular basis, switching to a bank with low charges for overseas use could save you a lot of money. And both Visa and Mastercard debit cards are accepted all over the world.
How about using a credit card?
Credit cards have similar charges to banks - in that they will typically hit you with a 'load fee' of up to 3% on every transaction. There are a number of credit cards that don't charge any load fee at all, however. Halifax, Saga, MBNA, Nationwide, Lloyds, Post Office and Capital One all offer cards that don't charge a fee when they're used abroad for purchases.
Exchange rates are set by the card network (eg Visa), and are as close to the market rate as you're likely to get.
However, most credit cards will hit you with large fees for using them to withdraw cash. What's more, they'll usually start charging you interest on the cash from the moment it pops out of the ATM. A few are fee-free abroad but check with your card provider if you're unsure.
Consider a pre-paid card?
If you're not in the mood to switch bank or take out a new credit card, another option is to consider a pre-paid card. You can load these with a specific currency, such as euros or dollars, before you go on holiday.
The exchange rate is set at the time you load the card up, rather than the time you make the purchase, and you will generally not be charged for transactions abroad.
It can be hard to see whether you're getting good value from these cards or not, as the card provider will make their mark up on the exchange rate when you load up the card, rather than charging you when you use the card. But if you fear that the pound is going to get weaker, they can be a good way of locking in a preferential exchange rate.
As well as pre-paid cards loaded with foreign currencies, it is also possible to get a sterling prepaid card. These allow you to load British pounds onto your card, and then charge you for each purchase or cash withdrawal - typically less than a bank or building society would.
If you do opt for a pre-paid card, make sure you're clear on all their charges and conditions. Some will start to levy a charge on your card if it isn't used for a while. Others have very high fees if you try and move money off the card and back into your bank account.
Beware of being asked to pay in pounds
Many cash machines and card terminals overseas will now offer you the opportunity to pay in British pounds, rather than the local currency. While this may sound appealing, it's often a gateway to higher charges.
Machines that offer this mechanism set the exchange rate for you, and it's usually much less competitive than your bank's rate. As a rule of thumb, you should always refuse the offer of paying in pounds, and pay in the local currency instead.
Tell your bank before you go
If you're travelling abroad, it's often worth telling your card providers before you go, so that they don't block your card as soon as they see a foreign transaction. Many banks have over-sensitive anti-fraud systems which automatically cut off your card if they see you using it outside of the UK.
Although a phone call should be enough to set things right, this isn't always as easy as it should be when you're on the other side of the world. You may end up on the hook for some hefty telephone charges too!