Martin Lewis has issued a warning to holidaymakers about a common mistake that could cost them money when using ATMs abroad. The money-saving expert appeared on ITV's This Morning on Tuesday to explain why travellers should always opt to pay in the local currency rather than pounds.
The one question travellers get wrong
When using an overseas ATM or card machine, a prompt often asks whether you want to pay in pounds or the local currency (e.g., euros). According to Martin, many people choose pounds without realising it leads to a poor exchange rate.
He explained that this is known as Dynamic Currency Conversion (DCC), where the foreign ATM or retailer converts the transaction into pounds at the point of sale. However, the exchange rates offered are typically far worse than those provided by your bank or card company.
Why paying in local currency is better
Martin highlighted that travellers using specialist overseas spending cards often get exchange rates close to the interbank rate. In such cases, letting your card provider handle the conversion is usually cheaper. Even standard debit and credit cards tend to offer better rates than foreign ATMs.
He cautioned that overseas providers can add a markup of 6% or 7% on the exchange rate, and some cash machines may also charge an additional withdrawal fee.
How DCC works
Consumer group Which? describes DCC as a practice that enables foreign retailers and ATM operators to convert a transaction into pounds at the point of sale. While convenient, the exchange rates are often unfavourable.
Martin noted that some cash machines actively push users to select pounds because it is more profitable for the operator. He joked about the persistent prompts: "I want euros, please. Are you sure? We won't do the conversion. Are you absolutely sure? Yes, I want euros."
Simple rule for travellers
Martin's advice is straightforward: always choose the local currency when paying abroad. Whether you are in Europe paying in euros, in the United States paying in dollars, or anywhere else, opt for the local currency over pounds whenever you are given the choice.
By following this rule, holidaymakers can avoid unnecessary fees and get a better exchange rate on their spending.
