Sloping off this winter?

Summer may be over but you may have postponed your holiday until autumn or winter. If so, you may need a refresher on how to make the most of your cash when you go away.

Rule 1: Use a credit card to buy your flight. That way you are protected if the airline goes bust.

Also use it to buy goods and services abroad. That way you are protected if the bargain you buy falls apart when you use it. That protection only applies to items of £100 or more.

Rule 2: Use a debit card to take cash out of foreign ATMs. Debit cards are always cheaper for cash than using a credit card which will charge a higher rate of interest and the interest starts at once. Sometimes it’s hard to ever pay off completely.

Rule 3: Whenever you use your card abroad you may be asked if you want to pay in sterling or in the local currency, always say the local currency. This may seem counter-intuitive but you will get a better rate from Visa or Mastercard than you will by letting the local agent do the conversion. It is called dynamic currency conversion and it is a way of getting more money from tourists.

Rule 4: Most credit and debit cards will charge you extra just for using your card abroad. It is called foreign currency loading and is 2.75% to 3% – in other words a £100 purchase will cost you an extra £3. That can amount to a lot when you pay for your hotel. A very few brands do not make that charge. Nationwide, Post Office, and Abbey Zero credit card charge nothing around the world and Saga charges nothing in Europe and 1% elsewhere. So take out one of these in good time before your trip.

Nationwide has the same deal on the debit card used from its current FlexAccount. You can open one just for this purpose – putting some money in before you go away and using that card to draw cash when abroad.

Final tip: If you are going to the USA or Euro-zone you can use a third type of card – a prepaid card – which will be branded Visa or Mastercard. You can pre-load it with euros or US dollars – but not other currencies at the moment.

The exchange rate you get will be better than taking cash but not so good as using a free debit or credit card. Some cards also make other charges so make sure you check before committing yourself.

Paul Lewis is a freelance writer who presents Money Box on Radio 4