Tourists waste millions when they use cards abroad Nearly half of British tourists are wasting millions of pounds in card transaction charges on holiday because they do not understand the fees levied when bills are converted into sterling from local currency. When customers pay at hotels or restaurants or use a cash machine abroad, they are often offered the chance to pay in sterling instead of the local currency. However, tourists who pay in this way will face a charge, which is levied by retailers on debit and credit cards. The charge is typically 4pc of the value of the purchase, and is totally legal. Few people know about it the charge. Caxton FX, a currency exchange company, said more people than ever were being caught out. According to its research, 42pc of Britons are paying over the odds by using "dynamic currency conversion" (DCC), a 13pc increase since 2011. The company believes that this could cost consumers as much as £292m this summer. James Hickman, managing director of Caxton FX, said: "A lack of confidence with foreign currency is seeing the number of people caught out by DCC increasing year-on-year, and the extra 4pc charge on every transaction could add up to some serious cash over the course of a two-week holiday - as well as some worrying bank statements when people return to the UK. However, DCC is a perfectly legal charge so it's up to the individual to make sure they are not being caught out by this. One in 10 British tourists admitted to using their debit or credit card for all transactions when abroad as they didn't understand the local currency. Mr Hickman said: "The ubiquity of chip and Pin means that using cards abroad is a sensible option for many travellers who would rather not carry wads of cash around on holiday or who struggle with making sense of foreign currency. However, debit and credit cards all come with associated costs which, when coupled with DCC, can add up significantly. Making sure you have the best credit or debit card to use abroad can cut costs considerably, while a credit card has the added benefit of protection if your purchase goes awry. Most banks and card issuers add a foreign usage fee to cash and purchase transactions. In addition to this, credit card cash transactions cost even more. The best credit cards for using abroad include the Halifax Clarity card, Metro Bank's card and the Post Office card. You could also use a prepaid currency card, which is chip-and-Pin protected but separate from your bank account. Many of these cards have lower fees than all but the best credit and debit cards. Try cards from FairFX or Travelex's Cash Passport.