What is foreign currency and foreign exchange?

Foreign currency is the money used in the country you are planning to visit - so for example, dollars in the USA and euros throughout most of Europe. Foreign exchange is the purchase of one country's currency against another - so how many dollars do you get for your pounds and so on. Exchange rates can vary between providers and there are often commission and handling fees charged for making an exchange.

A plastic card that bears an account number - this is assigned to a cardholder who has a credit limit that can be used to buy goods and services. Credit cards can also be used to obtain cash disbursements on credit. The cardholder is billed for the repayment of credit, usually on an instalment basis, and can be charged interest - though some cards have interest free offers. Credit cards are a safe and easy way of making purchases abroad and, despite potential fees (which you should look to limit), generally work out as a more cost effective way of converting currencies than travellers cheques or foreign exchange.

The concept is the same as a prepaid gift card, prepaid phone card, etc. You load money on to a card and this can be used at retailers' or online merchants. Money can be loaded using cash, a bank transfer or another credit card. You have control over the money on your card and therefore control the amount you can spend so there is no risk of running into debt.

Travellers cheques are one of the safest ways of taking money abroad. They are bought in the UK and as soon as you receive the travellers cheque you MUST sign each one. This is so that when you come to buy something abroad you can present the cheque, enter the payee and sign in front of a cashier – the idea is that the signature you make is proof you are the person who bought the cheque. Just like cash you will receive change if it's due – but the added bonus is that if the cheques are lost or stolen you can report this (as long as you have the cheque numbers) and receive a replacement - more on this in the Cheque Mate section of the main article.