Travelling to another country soon? Wondering if you should you pay in local or home currency?
You might find yourself with these questions while traveling, since often times you’ll have the option to pay with pounds but end up paying much more than expected. Below, we’ll help clear up when and if you should exchange your pounds for local currency, and just how to get the most out of your money.
Unfortunately, most times, you will get charged a hirer amount if you use pounds rather than the local currency. Here’s why:
Poor Exchange Rate
First, you are most likely going to encounter a poor exchange rate. You can search for better rates from your bank or credit cards, but you might have a tough time finding them.
A costly “service”, known as Dynamic Currency Conversion increases the amount you spend when using pounds. This “service” gives you the ability to “transparently” see the final price you’ve paid in your home currency. Yet they charge around 3% of the purchase price to convert your home currency. If you don’t swap for the local currency, you might end up paying a 5pc markup by paying in pounds at foreign shops, hotels and restaurants.
This add-on is totally legal and operated by companies that are able to take a fee for every transaction they have to convert (using that poor exchange rate). So, you might even notice merchants, hotels or restaurants encouraging you to use pounds because they get a cut from the DDC “service.” Make sure you ask about using local currency so you can make the most of your money.
Make the Most of Your Money
In most instances, it’s best to opt for the local currency. Search for better rates at your bank or sign up for a low-cost credit or debit card that doesn’t charge international fees! Getting up to speed on the DDC and exchange rate information will help you make the most of your money and the most of your trip! Happy travels!
Palmer, K. (31 July 2015). Holiday money: should I pay in pounds or local currency at foreign shops? Retrieved 27 October 2015 from http://www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/11760961/Holiday-money-should-I-pay-in-pounds-or-local-currency-at-foreign-shops.html
The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.