Page last updated at 23:28 GMT, Monday, 11 August 2008 00:28 UK

Money tips for a summer holiday

Money Talk
Frances Tuke
Abta - The Travel Association

Frances Tuke
Frances Tuke says holidaymakers should be aware of their rights

The summer holiday season is in full swing but some UK travellers will be hit by financial pitfalls that sting more than a bad dose sunburn.

So, here are a series of factors that UK holidaymakers should look out for during foreign holidays.

The first to consider is cash.

If you want to take foreign currency with you, then you can guarantee that exchanging money at the airport is going to be the most expensive way of doing it.

You can often get good deals online with well-known brands, but there are a variety of high street options including banks and travel agents.

However, be aware. Exchange rates and fees vary so today's best rate may not apply to tomorrow.

Credit and debit cards

Credit cards are useful commodities. Foreign transactions on a UK credit card will be covered if goods worth over 100 are not delivered or are faulty.

British holidaymakers on Spanish beach
Many UK holidaymakers travel to the sun without insurance

But credit cards usually impose a levy or a loading charge, which can be between 2% and 3% plus a handling fee which is typically between 1.50 and 2 per transaction.

On top of these fees, interest can be charged from the day of purchase, unlike the normal interest-free period available when you buy things in the UK.

There are cards which have much lower fees, or don't impose any at all, but you need to check which these are.

Another issue that has taken hold this year - and one that people need to be particularly aware about in European destinations - is something called dynamic currency conversion.

Pin machines or ATMs may give you the choice to complete a transaction in UK sterling or in euros (if you are in Europe).

Unfortunately, the conversion rate is frequently made at an uncompetitive rate, so counter-intuitively, it is always best to choose to transact in the currency of the country.

Travellers Cheques

Yes, they still exist and are still by far the best way to protect yourself against theft. Travellers' cheques can be replaced very quickly as long as you have kept a note of the serial numbers, whereas if you have cash stolen you will have to claim it back through insurance.

It is generally cheaper to use your debit cards to get cash at ATMs, your credit card when buying direct purchases and travellers' cheques for security

In some destinations you can even use travellers' cheques in shops like cash.

However, there are commission costs, and of course in most destinations you have to find somewhere to change them.

Taking a combination of options is always good, even if it means that you may have at least two cards, some cash and for long haul destinations, some travellers cheques as well.

In summary, it can be cheaper to use your debit cards to get cash at ATMs, your credit card when buying direct purchases and travellers' cheques for security.

When given the option, always transact in the currency of the country.

Travel insurance

Despite the risk of facing bills that could bankrupt you, millions of people from the UK, for the sake of a few pounds, travel abroad uninsured.

With airlines cancelling routes this winter you need to know what your rights are

The Foreign Office estimate that an air ambulance from the USA's East coast could cost between 35-45,000 - not an extra holiday expense anyone wants to plan for.

Unless you take out annual travel insurance, you can leave yourself exposed if you don't book travel insurance at the same time as you book your holiday.

In these uncertain times, if you lose your job, you may not want to continue with your holiday. Pre-paid travel insurance will cover you for this kind of cancellation as well as illness that prevents you from travelling.

European Health Insurance Card

The European Health Insurance Card (EHIC) replaced the E111 form a couple of years a go and are useful if you have an accident or suddenly become ill as you'll receive state-provided healthcare for free or at reduced cost.

You'll be treated on the same terms as citizens of the country you are in. Carry your EHIC with you at all times to prove you are entitled to healthcare.

But it doesn't replace the need for travel insurance. It doesn't cover repatriation, private treatment, baggage, or personal liability.

Cancelled Flights

With airlines cancelling routes this winter you need to know what your rights are.

Holidaymakers on Spanish beach
UK travellers should carry their European Health Insurance Card

EU regulations called Denied Booking Compensation, introduced in 2004, state that you will be entitled to a refund or re-routing, but if you have booked your flight separately from your accommodation arrangements - in other words, it is not a package - you will not be refunded for this.

You are afforded full financial protection with a package and tour operators have to take responsibility for every part of the holiday if one of those elements is disrupted.

Booking with an Abta company means that they can offer you financial protection for the travel arrangements you buy.

But you need to ask what is protected, as it is possible that not every element of your holiday is booked with Abta companies. For example, a flight only ticket is not always financially protected if the airline was to fail.

Abta members can offer insurance policies that will cover the insolvency of airlines or other travel companies if they are not already covered under other existing schemes.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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