Travel expert Simon Calder has issued a stark warning to British holidaymakers: choose the wrong payment option abroad and you could be adding 10% to your bill. Speaking ahead of the summer rush, Calder urged travellers to always pay in the local currency when using a credit card, cautioning that selecting pounds sterling triggers dynamic currency conversion (DCC), a practice that inflates costs.
How Dynamic Currency Conversion Works
Calder, a travel expert at The Telegraph, explained that when paying by card overseas, shop assistants or waiters often ask if you want to pay in pounds or the local currency. Many people choose pounds to avoid confusion over exchange rates, but Calder warned this is a costly mistake. “The one thing you will know is that you are going to be ripped off to the tune of typically 10%,” he said. “So, on a £20 lunch, you pay an extra £2, which you will never get back. Leave it for the waiter instead. Just remember, paying by credit card, always pay in local currency.”
Martin Lewis Echoes the Warning for ATMs
Money-saving expert Martin Lewis has also highlighted the dangers of DCC, particularly at ATMs. He advised travellers to always choose the local currency when withdrawing cash abroad. When an ATM asks whether you want to pay in pounds or euros, it is essentially asking who should perform the currency conversion. “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,” Lewis said. He noted that ATMs often pressure users to accept pounds because they profit from the unfavourable exchange rates and additional withdrawal fees.
Consumer Group Confirms Poor Exchange Rates
According to consumer group Which?, DCC allows foreign retailers and ATM operators to convert transactions into pounds at the point of sale, but the exchange rates offered are frequently far worse than those provided by banks and card issuers. This means travellers effectively pay more for the convenience of seeing the cost in pounds. Lewis warned that ATMs are “desperate to persuade you to let them do the conversion because they make a lot of money from it.”
Practical Advice for Travellers
To avoid falling victim to DCC, Calder and Lewis recommend always selecting the local currency (e.g., euros) when prompted by a card terminal or ATM. This ensures your bank or card provider handles the conversion, typically at a better rate. For card payments, always choose local currency; for cash withdrawals, select the local currency and decline the conversion offered by the ATM. By following this simple rule, holidaymakers can save up to 10% on every transaction.
