Martin Lewis has issued a warning to holidaymakers about a seemingly innocent question that could end up costing them a significant sum of money. The money-saving expert appeared on This Morning on Tuesday to explain why travellers should think twice before accepting a currency conversion offered by overseas ATMs and card machines.
Pay in pounds or local currency?
When abroad, ATMs and card machines often ask whether you want to pay in pounds or the local currency. According to Martin, the answer is almost always the local currency. He explained that the question essentially asks who should carry out the conversion: your card company or the foreign machine.
“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,” Martin said.
Specialist cards offer better rates
Many travellers now use specialist overseas spending cards that offer exchange rates close to the interbank rate. In such cases, letting the card provider handle the conversion typically yields a better deal. However, even standard debit and credit cards often provide more competitive rates than those from foreign ATMs or retailers.
“Even the bog standard pretty pants cards here tend to be better than the shop abroad doing it,” Martin cautioned, noting that overseas providers can add a markup of up to 6% or 7%, plus extra withdrawal fees.
What is Dynamic Currency Conversion?
This practice is known as Dynamic Currency Conversion (DCC). According to consumer group Which?, it allows foreign retailers and ATM operators to convert a transaction into pounds at the point of sale, but the exchange rates are frequently far worse than those from banks and card providers.
Martin also warned that some cash machines actively push users towards choosing pounds because it is more profitable for the operator. He joked about the prompts: “I want euros, please. Are you sure? We won’t do the conversion. Are you absolutely sure? Yes, I want euros. The ATM... they are desperate to persuade you to let them do the conversion because they make a lot of money from it.”
Simple advice for travellers
Martin’s guidance was straightforward: if you are in Europe, pay in euros; if in the United States, pay in dollars. Wherever your travels take you, always opt for the local currency rather than pounds whenever you are presented with the choice.
