Choosing a method of paying your way on holiday you can bank on

It's summer time again, so don't leave home without it. Cash? Credit cards? Travellers cheques? This time next year and there will be another payment method to take into account for anyone who travels to EMU member states like Spain, France or Italy for their holidays: Euro credit card transactions will be possible where retailers offer dual pricing, and this will eliminate the cost of currency conversion and having to pay commission for foreign traveller's cheques or ATM transactions. In the meantime, which is best? A wad of pesetas or francs in your wallet, or a combination of plastic and electronic cash?

Most seasoned holiday-goers always bring some cash with them to get over the first few days arrival and settling in at the resort. There is always the risk of losing cash and spoiling a holiday, so it makes good sense to bring along a combination of traveller's cheques, which can be replaced and come in most popular European currencies and credit cards, Eurocheques and best of all, your personal ATM card which can be used wherever the international ATM signs like Sirrus are shown on the outside of the machine. The advantages of being able to use your own ATM card are obvious: you don't need to remember another PIN number, there are no long queues in the European Bank (anyone who has spent an unhappy hour in an Italian bank changing a Eurocheque knows the feeling) and your account back home is simply debited in Irish pounds. You will still have to pay the foreign exchange difference. Traveller's cheques are a very safe and relatively inexpensive way to carry money since they can be replaced if lost or stolen, though you need to keep the list of serial numbers safe and separate from the cheques themselves. Most banks charge just 1 per cent commission on the sale of cheques. If cashed in a bank at your holiday destination, there isn't usually any further charge, but a hotel or retailer may add a fee. In order to avoid getting a poor exchange rate you should try to buy cheques in the currency of the country you are visiting. If you do bring dollar or sterling cheques, exchange them at a bank rather than a hotel or street bureau de change.

Eurocheques were once touted as the ideal EU holiday payment method, but they never fully caught on for a number of reasons. First, you need to remember to order and replace the special card and cheques in time at a cost of £4 to £6 for the card. The transaction charges are relatively high (though not as high as a credit card): each transaction costs a minimum of £1 plus 1.6 per cent commission on the value of each cheque.

Family Money's experience of using them on the Continent is mixed: many smaller retailers are reluctant to accept Eurocheques and can decline to do so - they argue that their own bank charges a higher fee for processing them than other cheques. Banks are supposed to accept them, but between the queues and the additional requirements for identification (don't forget to bring your passport with you to banks in France and Italy), and the fact that many French banks insist that you use the ATM machine for Eurocard transactions and will not cash Eurocheques anymore, forgetting your PIN number can cause no amount of trouble. If you withdraw cash using a Eurocard you will be charged 0.25 per cent of the amount withdrawn plus £1.25.

The ubiquitous credit card should be brought on holiday if you intend to do any serious shopping, if you want to rent a car or book ferry or plane tickets. You should try to clear your account balance before you go away, and if possible either extend your credit limit temporarily or, better still, put it in credit so that you can draw upon the funds while abroad. (Credit card companies pay modest interest on accounts in credit.) You can withdraw up to £200 a day using your credit card, but most of the banks charge between 1.75 and 2 per cent commission on each transaction and you will pay any exchange rate difference.

Interest is also charged on the amount you withdraw from the day of the transaction, so you should delay using your credit card as late as possible into the holiday.

Keeping your cash and cards safe is always a problem on holiday and you need to take some precautions, especially when using a credit card. For one thing, don't let it out of your sight in a shop or restaurant since it could be double-swiped and signed later. Most retailers here are moving onto electronic swiping systems, but that isn't the case everywhere, so make sure all copies are destroyed.

If your cards are lost or stolen, report it to the police and cancel them immediately, using the emergency numbers provided by your credit card company.