The holiday spending trick that cons even the most careful

You may think that you're doing everything possible to bring down the cost of your holiday spending money. You may be shopping around like a trooper and ordering your currency online well in advance of your departure. However, you may still be getting ripped off by a far more secretive trick.

So what do you need to beware of?

The con
The problem comes when you're overseas and you are offered the chance to pay in British pounds rather than the local currency when you pay by credit or debit card. You may think this is a cunning move - because you will avoid the currency charges levied by your card provider and you will fully understand any costs. However, this is far from the case.

The shops, restaurants and hotels are actually making up their own exchange rate when they do this exchange, putting a profit on top for themselves. This means you will pay roughly 5% more if you choose to pay this way - and could end up paying a great deal more over the odds because there's no limit on the levy that they are allowed to charge.

Last year, this con made £20 million for overseas retailers, in about 1,28 million transactions. And as the news spreads of just how much money can be made in the process, there are real concerns that the practice could spread like wildfire, leaving millions of holidaymakers out of pocket. Given that we spend £4 billion on our cards on holiday, there's a lot of money to be made and lost this holiday season through this nasty trick.

How can you stay safe?
The experts say the only way to steer clear is to pay in the local currency; your card provider will then levy a fairer exchange rate. There is no obligation for the company in question to charge you in the local currency, so it's worth checking before you buy - or in the case of a restaurant before you have eaten and it's too late to argue.

Of course, even if you manage to pay in the local currency, you will also need to watch out for any additional charges levied by your card provider. Some will charge £2 every time you use your card, plus around 3% of everything you spend. So it pays to make sure you have a cost effective card before you travel.

If you want to withdraw cash on a debt card, for example, your only fee-free option is the Norwich & Peterborough Gold account card. If you want to shop on a card without charges you can choose from Halifax Clarity, Santander Zero, Saga and the Post Office. Aside from this you can consider a pre-paid credit card which you load with cash and spend or withdraw cash fee-free. There are a number that don't charge a fee, including Caxton FX.

It seems everyone is out to take a slice of your holiday money, and if you want to have any left over for yourself you have to more careful than ever.

But what do you think? Are you being ripped off on your holiday money? Let us know in the comments.
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