Holiday foreign exchange is a licence for many providers to print money. Foreign currency loadings, commissions, withdrawal fees and transaction charges are just some of the stratagems dreamt up by card and currency providers to relieve you of large amounts of cash.

Withdraw £1,000 of currency though a foreign cashpoint, and Lloyds credit card holders get stung for £47.50 of charges – 2.75 per cent foreign loading and 2 per cent withdrawal fees. In addition, there’s a higher, 19.5 per cent interest rate, compared with 17.9 per cent on purchases. And there’s no interest-free period on cash.

The best way to take money abroad this year is the Nationwide Flex account debit card, which charges nothing at all, on cash withdrawals or payments.

Most debit cards impose a loading of around 2.75 per cent on purchases and cash withdrawals, plus a flat charge of 75p-£1 or a 1.5-2.5 per cent transaction fee.

Another top currency solution is cash bought in the UK from a commission-free provider with decent rates. Several companies now eschew commission, including the Post Office, Marks and Spencer and Thomas Cook.

Shopping around to find the best exchange rates is laborious but rewarding – in the table below there’s a difference of nearly £42 between the cheapest and most expensive providers of €1,000. Rachel Thrussell, head of savings at data provider Moneyfacts, says M&S and the Post Office tend to be amongst the cheapest. Central London bureaux de change can be competitive.

Customers of packaged, fee-paying current accounts such as RBS Royalties Premier can enjoy free foreign exchange.

Buy last minute at the airport and you will probably pay extra. On May 17 Travelex at Heathrow’s Terminal 1 offered €1.4004 for £1, including 1.5 per cent commission, compared with €1.4211, commission-free, on its website (www.travelex.co.uk).

However there is a security risk taking just cash.

Credit and debit cards are safer – you’re not normally liable for expenditure when they’re stolen. And following an Appeal Court ruling earlier this year, credit cards have retained the same money-back protection on faulty goods and services overseas over £100, as they do in this country.

Credit cards can be good value abroad and once again Nationwide wins hands down with fee-free purchases, although cash withdrawals attract a 2 per cent charge. Saga (backed by Liverpool Victoria) allows purchases without extra charges within the EU.

Most other credit card purchases, by contrast, charge 2.5-2.75 per cent foreign usage fee. Consumers should avoid ATM withdrawals on credit wherever possible: here you’re hammered with the same usage fee, plus a typical withdrawal cost of 1.5-2.5 per cent, and a hiked- up interest rate from day one. Capital One’s No Hassle Platinum interest rate is normally 6.9 per cent on purchases but 21.94 per cent on withdrawals.

Be warned that even if you buy currency on your credit card in the UK, you will still incur the higher interest rate.

Mike Naylor, a principal researcher at Which?, says holidaymakers normally get a better exchange rate from the ATM than at hotels or local bureaux de change.

When paying by card, particularly in Europe, watch out for a new scam known as dynamic currency conversion. Here the retailer or restaurant converts the price of goods from the domestic currency to sterling, at their own exchange rate, which is worse than that offered by your credit card company.

Naylor says travellers should carry a mix of two cards and some cash. Card company systems sometimes block purchases if they detect atypical (such as foreign) usage, which suggests fraud. Carry more than one card, or even better, four between a couple, and it’s unlikely you’ll get stuck. However, alerting a firm to your plans in advance could be risky. He says: “I’d be dubious telling someone in a call centre I was going on holiday for two weeks.”

Finally, there’s a new foreign exchange format – pre-paid travel money cards which are offered by American Express, Travelex, the Post Office and Western Union all act as a sort of updated, plastic version of now declining travellers’ cheques. You pay £10-£20 for the card, then there are a raft of top-up charges, loading fees, ATM fees and cancellation charges.

You can use pre-pay in the same way as any other card – at retailers or cash machines and once you’re out of money, that’s it. Cards have the same security feature as travellers’ cheques so if you lose them, the provider effects a replacement loaded up with the money you lost, though there may be a fee here too.