HOLIDAYMAKERS are expected to take an extra £1billion abroad with them this year as they shun credit cards for fear of overspending, industry sources say. Foreign-exchange group Travelex.co.uk said Britons were taking an average of nearly £200 more with them on holiday this year compared with 2007.

According to its report, the surge was because of people worrying about overspending on their plastic. The new report comes as fresh evidence show thatcredit card costs for UK consumers are on the rise, adding the financial burden that many British consumers are facing when it comes to using their credit cards.

One industry official said: “With increasing costs on all household bills, many people are relying on their credit card to get by each month. But these people are going to find themselves out of pocket as purchase and cash rates, along with charges, continue to increase. Since the beginning of the year there have been numerous increases to rates and charges, with some cash rates being increased by over 7% and purchase rates by as much as 3%.”

According to the source, the number of increases to purchase APRs is quite phenomenal adding that normally credit card providers avoid such increases as these are the rates customers see first. At the same time, this goes to show just how tough credit conditions have become for the institutions and this is being passed onto consumers. For example anyone with £5,000 of purchases on the Nectar Credit Card AMEX repaying the minimum 2.5%, min £5, the 3% increase will find themselves paying an additional £1,823.75 in interest over the life of the debt.

But according to Travelex.co.uk, some six out of 10 people said they had overspent on credit cards while on holiday in the past and thought they would be better able to stay within their budget if they took cash. About 28% also said they hoped to cut the cost of their holiday by spending cash rather than using their plastic, while others were worried about the fees associated with using cards abroad.

Anthony Hudson, UK retail director at Travelex, said, “It’s interesting to see this change in behaviour among British holidaymakers.

“The British public are still going abroad for their holidays but people do seem to be managing their money much more carefully by purchasing more of their currency before they depart. “This allows holidaymakers to budget and avoid overspending as well as avoiding transactions fees levied by the card providers.”

Meanwhile, a travel agent has been named as the cheapest place to convert foreign currency, offering consumers better value than banks and the Post Office, according to a leading consumer group. However, Which? said First Choice offered the best deal for holidaymakers looking to buy 500 US dollars, charging a total of £260.42. Marks & Spencer came in second place, charging £260.69 for the same sum, followed by HSBC at £261.10.

At the other end of the scale, Thomas Cook was found to be the most expensive place to change money, with consumers paying £274.73 for $500, £14.31 more than First Choice, despite it also offering commission-free currency. Fellow travel agent Going Places came second last, charging £267.56, while the Post Office charged £265.59.

But according to Which? while many companies offered commission-free currency exchange, consumers could still end up getting a bad deal because of poor exchange rates and other fees. The company says that it was generally cheaper for people to collect their currency themselves to avoid delivery charges, although some companies would only deliver it.