Widely accepted credit cards remain increasingly popular

WHETHER you are taking your summer holiday at home or abroad there are some basics that need to be sorted out ideally before you go how much hard cash you should take; should you opt for credit cards, Eurocheque cards, traveller's cheques or a combination of all three? Do you have adequate holiday insurance? is your car properly insured if you are taking it to the Continent?

Ideally, the family holiday is being paid for by advance savings, but with interest rates as low as they are borrowing to meet, some or all of the cost does not seem quite so extravagant, particularly if you have your personal finances under control. Personal borrowing rates are as low as 10-11 per cent APR at the moment, with 12 month repayments on a £1,000 loan at just under £90 a month. Better still, said one bank manager, "your readers could take out a budget plan and draw down their holiday money knowing that it is already part of their monthly outgoings.

(Bank budget plans can also take into account mortgage payments, utilities, school fees, car insurance and any other regular or once off expenses at the cost of a regular overdraft/personal loan rate.)

Once you have set aside the amount of money you plan to spend, you need to decide the form it will take. Credit cards are increasingly popular since they are so widely accepted. For anyone visiting the US or Canada a credit card is an absolute necessity since it is not uncommon for certain retailers, like petrol stations and all night grocery stores in larger American cities to accept credit cards only after dark.

The biggest advantage of credit cards is their convenience. You do not have to carry a lot of cash around with you, if you know your PIN number, you can withdraw cash from ATM machines or banks that display international credit card symbols. If you are disciplined enough to pay off your statement every month, credit cards are the cheapest form of credit. If you only pay the minimum, your purchases will be charged at an interest rate of as high as 25 per cent per annum. Cash withdrawals are not only charged at a higher interest rate, but the rate is calculated immediately, without the benefit of any interest free period.

Credit/charge cards, like traveller's cheques, are also a good choice for holidays, because they can be replaced if lost or stolen, though there are as many stories as there are cardholders for the speed or efficiency at which replacements are arranged. American Express, Diners and the credit card companies that issue gold or premium cards pride themselves on very quick replacement, sometimes in person. Check with your issuer about its replacement arrangements.

The Eurocheque Card is another alternative form of payment if you are travelling in Europe and is convenient because you write the cheque in the currency of the country you are visiting and your current account is then debited, the same way it is when you write a cheque at home. The Eurocheque Card can also be used to withdraw currency from ATM machines that display the Euro sign, but travellers to, France should be warned that many smaller French banks will not cash cheques and insist that Eurocard holders use the ATM. Just make sure you remember your PIN number.

The downside of the Eurocheque and Card is that the value of any single cheque you write is guaranteed to just £140 (£800 is the overall cheque value limit). Transaction charges are relatively expensive, ranging from 90p for every cheque valued up to £56 and 1.6 per cent of the value for cheques valued at between £57 and £240. Over that amount and you are charged £4, there is also an automatic 25p handling charge per cheque. Be warned too that many banks and retailers may insist on seeing your passport when you want to use a Eurocheque, despite the fact that your signature is on the Eurocard. (Italian banks, make such a song and dance about currency transactions that they will usually insist on photocopying your passport just to exchange your currency into Lira).

If you do decide to carry cash, shop around for the best exchange rate from the banks and building societies here. The rates will vary slightly from day to day and if you are buying a significant amount, the difference you pay will be worth the time visiting a couple of different branches. Rates at the foreign exchange desks of the main banks are nearly always better than those offered by Bureau de Change which will charge you a higher commission. (Commission rates vary from 1-2 per cent for cash or traveller's cheques.)

If you live in a small town or the currency you wish to buy is at all unusual, you may have to place your order in advance. Anyone travelling to an exotic holiday location should brace themselves for a multiple commission charge since you will probably have to bring either US dollars or sterling to your destination and exchange them for the local notes. A spokesperson for AIB told Family Money that the bank will make every effort to secure an unusual currency through the currency markets in London, but sometimes - such as in the case of most South American countries and some in the Far East (though not Japan or Hong Kong) you have to buy your money on arrival and often at official government rates. Take care of dealing with currency touts, since this practice is often illegal, but sometimes, said the spokesperson, the official rate quoted from London is not as good as the rate you will receive from the local bank when you arrive - certain Caribbean islands are well known for such a dual pricing policy, Family Money was told.

Be sure to take care of your currency and cards whatever you do, do not leave any money in a hired car, unattended on the beach, in a back pocket and avoid handing over a credit card in a restaurant or shop. Insist on going up to the cash desk with it, or ask the waiter to bring the card machine to your table. Credit card theft and fraud is a big business and your signature and card number may be just enough for a thief to enjoy a spending spree at your expense.