Be wary of the hidden holiday costs of cards
Sterling has recently hit a five-year high against the dollar and a 20-month high against the euro. The news is good for anyone planning an overseas holiday soon – it means you'll get more foreign currency for your pound.
But getting the best deal when spending abroad remains hugely complicated, with fresh warnings emerging this week from readers that overseas retailers and hotels aren't playing fair.
The problem stems from when you're offered the choice of having your plastic card payment taken in the local currency, or in sterling. Most unsuspecting UK people plump for sterling on the basis that it must be more convenient.
But anyone who does so faces huge extra fees, says Andrew Hagger of Moneycomms: "It's catching many holidaymakers unaware and costing them more than it needs to make purchases overseas.
"They simply don't understand what's called Dynamic Currency Conversion (DCC) and that they are paying over the odds on the exchange rate without realising it."
He points out that most banks charge 2.75% or 2.99% for non-sterling transactions – when you pay by plastic in local currency.
"However, the DCC charges are sometimes as much as 6% or 7%." That's because the local retailer or bank can set their own exchange rates and charges on top of your own bank's charges.
The golden rule, to help you avoid the unnecessary extra cost, is to always choose to pay in the local currency. But knowing about DCC may not even stop you being hit by extra charges.
One concerned reader contacted us to report that on many occasions in Spain, and recently in China, the retailer applied DCC and completed the transaction in sterling without giving him any choice or asking his permission.
That's not right and if you're hit by that you should be able to claim the extra costs back, says Mr Hagger. "I raised the question with the UK Cards Association which told me that the cardholder should be offered the choice to pay in the local currency, and retailers should not be charging in pounds without permission. If people are not offered the choice, they are entitled to be refunded any commission or costs incurred."
If you do get caught out this summer by this sneaky trick, contact your bank or credit card firm.
That begs the question of what the best way to pay abroad is. If you're a frequent traveller it's worth getting a credit or debit card with no exchange fees.
An alternative is a prepaid currency card which allows you to spend cash you have loaded on it.
Bear in mind that rates could improve but markets are fickle and sterling could slip out of favour, hitting your holiday cash.