Martin Lewis, the founder of Money Saving Expert, has issued a warning to holidaymakers about a common ATM mistake that could leave them out of pocket. Speaking on ITV's This Morning, he explained why travellers should think carefully before accepting a currency conversion offered by foreign ATMs and card terminals.
The Currency Conversion Question
When an ATM or card terminal asks whether you want to pay in pounds or the local currency, it is essentially asking who should perform the conversion. Lewis clarified: "If it's euros, do you want your card company to do the conversion? If it's pounds, we will do the conversion for you and then charge your card."
Many travellers now use specialist overseas spending cards that offer exchange rates close to the interbank rate. In these cases, letting the card provider handle the conversion usually gives a better deal. However, Lewis noted that even standard debit and credit cards often provide a more competitive rate than foreign ATMs or merchants.
The Cost of Dynamic Currency Conversion
"Even the bog standard pretty pants cards here tend to be better than the shop abroad doing it," he said, warning that overseas providers can add a significant markup to the exchange rate. This practice, known as Dynamic Currency Conversion (DCC), can add up to 6 or 7 per cent extra, and some foreign ATMs may also charge an additional withdrawal fee.
Consumer group Which? explains that DCC allows foreign retailers and ATM operators to convert a transaction into pounds at the point of sale, but the exchange rates offered are often far worse than those from banks and card issuers.
Lewis's Advice
Lewis cautioned that some ATMs actively prompt users to choose pounds because it is more profitable for the operator. Describing the on-screen prompts, he joked: "I want euros, please. Are you sure? We won't do the conversion. Are you absolutely sure? Yes, I want euros." He added: "The ATM... they are desperate to persuade you to let them do the conversion because they make a lot of money from it."
His guidance is simple: if you are in Europe, pay in euros; if in the United States, pay in dollars. Wherever you travel, always choose the local currency over pounds when given the option. This straightforward tip can save holidaymakers a significant amount of money.
