Simon Calder, travel expert for The Telegraph, has issued a stark warning to British tourists: they risk being 'ripped off' by up to 10 per cent on every credit card transaction abroad unless they follow a simple rule. The warning centres on dynamic currency conversion (DCC), a practice where chip and pin machines ask holidaymakers whether they want to pay in the local currency or pounds Sterling.
The 10 per cent trap
Mr Calder explained that choosing to pay in pounds rather than the local currency effectively asks the cash machine company to handle the exchange, which typically offers a far worse rate than the customer's UK bank. 'You might be tempted for thinking, Well, I'll pay in Sterling of course, then I'll know how much it costs. The one thing you will know is that you are going to be ripped off to the tune of typically 10 per cent,' he said. 'So, on a £20 lunch, you pay an extra £2, which you will never get back.'
With the UK not using the Euro, this issue frequently catches Brits off guard. Mr Calder urged: 'Just at the start of the summer rush, I need to warn people about dynamic currency conversion. You're in a foreign country, you've got your credit card, you come to pay, the shop assistant, the waiter says, Okay, here's the card terminal and look, do you want to pay in Euros or in good old British pounds?'
Martin Lewis echoes the advice
Money-saving expert Martin Lewis has also highlighted DCC, using a comparable example with cash machines. He advised travellers to always opt for the local currency when withdrawing money abroad. '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,' Mr Lewis explained.
According to consumer group Which?, DCC allows foreign retailers and cash machine operators to convert a transaction into pounds at the point of sale, but the exchange rates offered are often significantly worse than those supplied by banks and card providers. Mr Lewis cautioned that ATMs overseas frequently attempt to persuade individuals to use pounds due to the poor exchange rate and even tack on withdrawal charges.
'I want euros, please. Are you sure? We won't do the conversion. Are you absolutely sure? Yes, I want euros,' he said. 'The ATM... they are desperate to persuade you to let them do the conversion because they make a lot of money from it.'
Impact on holiday spending
The 10 per cent mark-up can quickly add up. For a family spending £500 on meals, souvenirs and other purchases, the unnecessary conversion fee could total £50. Mr Calder's golden rule: 'Paying by credit card, always pay in local currency.' This simple step ensures the cardholder's own bank handles the conversion, typically at a more favourable rate.
