Tourists warned over choice between foreign or your own currency when using ATM abroad

Despite Googling it 100 times, there's always that moment of panic when you forget what currency to pay in when you're on holiday.

Particularly in Europe, you always end up visiting that place which only accepts cash, forcing you to head to the ATM machine.

Obviously you leave the missus at the dinner table so it doesn't look like you're doing a runner from the restaurant.

Now, many cash machines will ask whether you want to be charged in your home currency or their local one.

While choosing your own currency might seem like the logical choice, it can actually make the withdrawal more expensive.

This is due to something called Dynamic Currency Conversion (DCC), which allows the provider to convert the money into your home currency using their own exchange rate.

Cash machines abroad will give you the option of choosing in the home or local currency (Getty Stock Images)

Issue is, that rate is usually worse than the one your bank would use, meaning you end up pay extra without always realising.

For example, if you're from the UK and spend €20 at a Spanish ATM, the machine will offer to convert the amount into pounds.

If you had accepted the conversion, the ATM would have charged £16.75.

Instead, by choosing to be charged in Euros and letting their bank handle the conversion, the final cost was £16.44, as reported by Wise (figures accurate as of last year).

Although the difference on a small withdrawal might not seem huge, these extra charges can quickly add up during a trip.

Martin Lewis' advice is to take cash with you on holiday (Getty Stock Images)

Martin Lewis explained on MoneySavingExpert.com that it's better to get cash before you head off.

"While personally if I need cash, I use my specialist card and tend to withdraw it from an ATM at the airport as soon as I arrive. Yet if we focus only on bureaux de change," he said.

"In general it's a better bet to get cash before you go, as you can research the cheapest rates (use TravelMoneyMax).

"Otherwise travel abroad and you're blind to what's out there and especially in tourist resorts you can find poor rates and limited competition.

"I'm not saying overseas bureaux can't undercut UK ones, it's just they have to be very cheap to beat the UK's cheapest, and it's unlikely you'll stumble on that randomly.

"The exception is if you know of a specific bureau that may give very good rates, for example, you go to the same place every year. Then absolutely if you know what you're doing, wait."