Going on holiday to France, Italy or Spain this year? Then beware of a new trick to overcharge your credit or debt card.

Many retailers and restaurateurs in these countries now have the ability to ask you to authorise your bill in euros but then they charge your card in £sterling. This may sound innocuous but there’s a sting in the tail. The retailers charge you an additional fee of up to 4% for the service! The service is called “dynamic currency conversion”.

Guidelines from Visa say that British cardholders should verbally be given the option to either have their card charged in euros or to authorise in euros and then be charged in £sterling when the transaction goes through. In practice, it seems that few of us are being offered the alternative. Many retailers are automatically charging us in £sterling - and with the extra fee! The lack of explanation may be down to the language barrier but we are a little more cynical than that! Even where an explanation is given, we doubt whether many retailers and restaurateurs will clearly spell out their extra service fee. After all to them, extra profit is extra profit!

Our advice is that when abroad in France, Italy or Spain, always insist that your credit card transactions are processed in euros. That’s because some UK card operators such as Saga, Lombard Direct and Nationwide will convert euros to Sterling completely free of charge. Others, such as cards from our high street banks, do charge a mark up of 2.75% called a foreign currency loading fee – but even that’s cheaper than the retailers 4% dynamic currency conversion charge.

In fact even with a 2.75% loading fee, it can still be cheaper to shop with your credit card rather than converting your cash before leaving these shores or converting it abroad at the bureau de change. That’s because the exchange rates used by Mastercard and Visa are often far better than you can get for your cash and travellers cheques. And don’t be fooled by the commission free slogans outside the bureau de change. They might not charges fees but their currency rates are never too cheap – after all, how else can they make a profit?

And here’s another bit of useful advice. Unless you have an emergency don’t use your cards to withdraw local currency. That’s because you’ll be charged interest from the minute the cash leaves the cash dispenser. Remember, there’s no interest free period on cash withdrawals.