Au revoir holiday cash, plastic can work better

Those of you going on holiday soon can look forward to your money stretching further, thanks to the stronger pound. In recent weeks sterling has fallen back, but many skiers and winter sunseekers could still be getting about 10 per cent or more for their pounds than last year.

If you are a Londoner, probably the best place to buy foreign currency, surprising though it may sound, is the Marks & Spencer branch at Marble Arch. You might get 2 per cent or more extra currency from M&S than if you went to a bank or high street bureau de change such as Thomas Cook. If you change, say, pounds 500, M&S might save you up to $20, or more than 100 French francs (see table).

Travelex, the company that runs M&S's Marble Arch bureau, says the rates are set to be as good as any of the big four banks; in addition M&S has no commission or other charge. Elsewhere you may pay 1 to 2 per cent with a minimum of perhaps pounds 2.

When comparing exchange outlets ensure you add in the effect of commission and other charges, and note that where there are flat-rate charges or minimum charges these will have a disproportionate effect if you change small sums.

M&S also sells foreign exchange at other branches, including Oxford Circus and High Street Kensington in London, but the rates are not as good as Marble Arch and there is a pounds 2 flat fee. Confusingly, it is also possible to find rates varying between branches of Thomas Cook or in the same high- street bank.

The magazine Which? picked out American Express, AT Mays, the travel agent, and Bank of Scotland, as best buys for those outside London. Whether shopping around is worth while depends on how much currency you are buying. There are good reasons for not taking too much currency abroad in cash- form.

First, cash may not be covered by your insurance. Home & Overseas, the travel insurer, says that most policies cover only pounds 250 (pounds 500 including traveller's cheques). Traveller's cheques, of course, offer security; if you lose them you should be able to get replacements within 24 hours. In the United States it is also possible to use (dollar-denominated) traveller's cheques as cash. But the need in other countries to convert them back into cash again can make them an unwieldy as well as expensive way of arranging your spending.

It is always worth having at least some currency in cash when you first arrive. But for the rest, plastic may well be your best bet in most countries now.

Credit cards are widely accepted and should give you a better exchange rate than paying with foreign currency. In addition both credit cards and many British cashpoint cards can be used to withdraw cash, often at favourable rates compared with changing cash yourself.

Both forms of plastic are more secure than cash in that if they are stolen and you report them lost, your liability is likely to be limited to pounds 50. That said, if they were stolen you should also bear in mind that you are unlikely to be able to get replacements easily while on holiday. (A tip: just as it is worth having two wallets with cash in them, it is also worth separating cards into two or more holders.) Cash withdrawals or debit transactions using cards tend to be more expensive than spending on a credit card but still cheaper than exchanging cash at a bureau. Withdrawing cash using a credit card is not the luxury it is commonly thought, the charges are broadly the same as for using a UK cashpoint card abroad, typically amounting to between 1.5 and 2 per cent, with a minimum of perhaps pounds 1 or pounds 2 (on top of the exchange rate that you get).

Your bank may not automatically issue internationally compatible cashpoints and debit cards. You may need to ask and allow two weeks for a replacement, but there is generally no charge. If your bank card does not carry a Visa symbol, the international symbols you may need are Cirrus (for cashpoints) and Maestro (for debits).

Your bank or card issuer should be able to advise on how extensively your card can be used. Make sure you have a pin number for your credit card. Ensure you have written down the emergency telephone numbers and details of the cards and that these are kept separate from the cards in case you need to report them lost or stolen.

Visa has a free Holiday Money Guide. Call 0800 1060 76. If you buy currency through Thomas Cook it will give you a plastic card-sized Currency Wise Guide with conversion rates.

WHERE YOUR POUND IS WORTH MORE

What you might get for pounds 500

Outlet Charges US$ FFr SwFr Aust Sch

Amex pounds 2 784 4,350 1,120 9,060

M&S Marble Arch None 796 4,370 1,130 9,120

M&S High St Ken pounds 2 780 4,300 1,100 8,980

Thomas Cook, 2%, min pounds 3 770 4,250 1,100 8,800

Hammersmith

Rates as at 3 February