Post Office Travel Money Card is issuing a warning to users about the fees and charges they may incur from making transactions in pounds while overseas.  

By choosing to settle your bill abroad in pounds sterling rather than the local currency you may have to cough up an additional conversion fee which could prove costly. 

Customers are also being warned not to take out cash by using the card in an ATM. The alert follows a holidaymaker who racked up a £100 bill at an ATM in the space of a week using the card.

Post Office says that it is currently writing to all customers to advise them of the risks and fees associated with the card. Leaflets will also be handed out in branch and to new customers to make them aware of the charges. It costs around £1.91 per ATM withdrawal outside the UK which can be incredibly costly over the course of a holiday. You'll be charged in sterling rather than the local currency by default at a cash machine.

[Read more: Best credit cards to use on holidays abroad]

A Post Office spokesperson said: "The Post Office's Travel Money Card can be used like a debit card in millions of shops, bars and restaurants across the world. That's the best way for our customers to use the card; paying with it is commission and fee free when used in one of the 13 currencies we support that can be loaded on the card.

"When making purchases abroad we strongly recommend completing the transaction in the local currency, as converting the transaction to sterling will result in additional fees.

"These fees include a Dynamic Currency Conversion fee, none of which is levied or received by the Post Office; for cash withdrawals, ATM charges are very common and apply to credit, debit and prepaid products."

Don't let this put you off prepaid currency cards. They're one of the safest ways to take cash overseas, they're easy to cancel and replace and it means that you're not carrying mega wads of cash around.

Here's what you need to know. 

What is a prepaid currency card?

If you're going abroad, you don't just have to rely on your credit card or bank debit card to pay for things. You could use a prepaid currency card instead and leave your normal plastic at home.

The great thing about these cards is that you can simply load it up with funds then spend safely and stick to a budget when you’re away. If your funds run out, you can simply reload usually over the phone or online.

What’s more, unlike the majority of credit cards and debit cards, in many cases, prepaid currency cards won’t charge you to make cash withdrawals overseas and you won’t always be charged a foreign transaction fee when you use the cards for purchases in places like shops and restaurants.

So, let’s take a closer look to see how some of these prepaid currency cards compare. For this exercise we’re looking at Euro, Us Dollar, Multi-currency and Sterling prepaid cards and their fees when used abroad.

Euro, US Dollar and multi-currency cards are fairly self-explanatory, as they are designed for use in the Eurozone, the US or in a few destinations and the rate is normally fixed at the time of loading. Sterling cards can be taken anywhere in the world and your money is exchanged from Sterling into the local currency each time you transact using the card.

One important thing to note is that cards that don't charge fees generally have a poorer exchange rate than those that do. You can compare rates on some of the cards mentioned in this article at the Timedial website.

Post Office Travel Money Card

The MasterCard Post Office Travel Money Card can be loaded with 13 currencies: Sterling, Euros, US dollars, Canadian dollars, Australian Dollars, Croatian Kuna, New Zealand Dollars, Polish Zloty, South African Rand, Swiss Francs, Thai Baht, Turkish Lira and UAE Dirham.

There’s a minimum top-up of £50 no matter the currency and there’s a 3% charge if you use your card to pay in a currency other than what is permitted.

You'll have to pay a load fee if you opt for the Sterling version, which is 1.5% (minimum of £3, maximum of £50).

All of the cards have an ATM withdrawal fee, which varies depending on the local currency (€2/$2.50/AUD $3/CAD $2.50/NZD $3.50/ ZAR30/ CHF2.50 / HRK15/ THB80/TRY7/PLN8.50/ AED8.50/£1.50).

You won’t be charged a fee on transactions unless you have gone for the Sterling option which attracts a £1.50 fee.

The card lasts for four years and there is a £2 monthly maintenance fee which starts 12 months after your card expires. To close your account there is a £5 redemption fee.

Travelex Money Card

The Travelex Supercard, which was a hugely popular prepaid card offering near perfect rates when spending abroad, closed on 24 July 2017 as the firm says it is too expensive to provide.

Instead you can get the Travelex Money Card.

This allows you to load the card with up to 10 currencies including: Euros, US Dollars, Australian Dollars, Turkish Lira, Canadian Dollars, New Zealand Dollars, South African Rand, Swiss Francs, United Arab Emirates Dirham and Sterling.

It will pick the right currency for you, depending on where you are in the world, and if you don't have any funds in one particular currency it will draw funds (if they're available) from another. Be aware that doing this will incur a 5.75% fee each time though. 

There are no ATM or purchase fees for withdrawing or spending pre-loaded currency in an applicable destination, i.e. US Dollars in the US. But the card does have an inactivity fee of £2 per month if it's not used for 12 months. The redemption fee for the card is £6.

ICE Travellers Cashcards

This prepaid MasterCard is available in SterlingEuro or US Dollar versions.

All are free as long as you load £700 or more. If you load less you’ll have to pay a £4.75 fee to purchase the card.

The minimum load amount is £50-worth of currency. Loading the Euro and US Dollar cards is free, but the Sterling option attracts a fee of 2.85% each time.

None of the cards charge for purchases or cash withdrawals, plus there are no inactivity or redemption fees.

You also earn 1.5% cashback on all purchases above £50/€50/$50.

FairFX Currency Cards

FairFX also offers three prepaid MasterCard currency cards – the Everywhere Card, the Euro Card, and the US Dollar Card.

It has its own exchange rate, compared to most other cards which use MasterCard's or Visa’s, and it's generally pretty competitive. But to offset this there are some fees to consider.

There’s a one-off £9.95 card purchase fee for all three cards, but you can avoid this as long as you apply and load £200 or more. However, the minimum load is £50, €60 or $75.

None of the cards attract a fee for purchases abroad, but all three cards attract a fee for ATM cash withdrawals of €1.5/$2/£1 +on the Everywhere Card there is an additional 1.4% fee.

To redeem any leftover balance will cost you €5/$5/£5.

Avios Multi-Currency Cash Passport

The Multi-Currency Cash Passport available from Avios also allows you to load up on up to 10 different currencies: Sterling, Euros, Canadian Dollars, US Dollars, South African Rand, Australian Dollars, Turkish Lira, Swiss Franc, Emirati Dirham and New Zealand Dollars.

Like the Travelex Money Card it will pick the right currency depending on your location and if you don't have any funds in one particular currency it will draw some (if they're available) from another, subject to a 5.75% fee.

The minimum load/top up is £50. You won’t have to pay a fee for purchases but there is a fee for cash withdrawals which depends on the country (£1.50/€1.75/US$2.30/AU$2.30/CA$2.40/NZ$3/ZAR20/ TRY5.40/CHF2.20/AED8).

There is also an inactivity fee of £2 a month if you don’t use your card for 12 months but if you choose to redeem the card you’ll have to pay £6.

The card allows you to collect one Avios point for every £1 you load onto the card, which offsets the fees if you’re a collector.

AA Travel Currency Cards

The AA offers Euro and Worldwide (Sterling) Travel Currency prepaid MasterCards.

The cards cost £9.95, but you get refunded if your first load is over £100. The minimum load is £10 or €10.

There are no transaction fees and no withdrawal fees if you withdraw £50/€50 or more (the withdrawal fee will be charged but then refunded to your account). If the withdrawal is less than these amounts, then you will be charged £1.50/€1.50 respectively.

A £1 a month dormancy fee will kick in if you don't use the card for 12 months. If you choose to close the card, there is a £10 redemption fee.

Virgin Money Travel Money MasterCard

The Virgin Prepaid Travel Money MasterCard allows you to load either Euros or US Dollars.

You’ll need to load a minimum of either €100 or $100 when you apply.

You can use the cards to make purchases for free in the currency specified. However, cash withdrawals attract either a €1.50 or $2 charge.

There are no inactivity, dormancy or initial fees to worry about. But there is a redemption fee of €7.50 or $10 which may apply.

EasyJet Euro Currency Card

EasyJet has also got a prepaid card you could consider in the shape of the Euro Currency Visa Card.

You can get the card free if you load over £100. Loading under this amount will attract a £5.95 charge.

The minimum you can load is €60. ATM cash withdrawals and overseas card purchases are free of charge.

The card lasts five years. 12 months after expiry the card attracts £1 a month fee. Closing the account costs £10.

Other things to bear in mind

It's worth noting that some of these cards will add a fee if you use a credit card as opposed to a debit card or bank transfer to load them.

It's also worth bearing in mind that most prepaid cards do not benefit from Section 75 protection – unlike credit cards. So, you should be wary making big purchases with them.

You are also likely to be charged for using your card outside the currency it was intended for. If you think you’ll need more than one currency when you are away go for a multi-currency option or a Sterling card.

Many of the cards also have a cancellation or redemption charge when you stop using the card and ask for it to be closed down and any money refunded to you. This ranges from £6 to £10 in most cases.

[Read more: Best 0% credit cards that offer interest-free periods on spending]

How prepaid cards stack up to debit and credit cards

Metro Bank, offers a current account that doesn’t charge fees when you use your debit card within Europe. Find out more in The best debit card to use abroad.

In terms of credit cards, there are quite a few cards that don't charge you for using them abroad – the Halifax Clarity, the  Post Office Platinum, the Santander Zero Credit Card, the Aqua Advance, the Nationwide Select and the Saga Platinum (only open to people aged 50 or over).