Holidaymakers given the option of paying for food, gifts and other purchases in sterling while abroad may be tempted to say yes.
But if this happens to you during your travels, you need to be on your guard, as you could fall victim to a scam known as dynamic currency conversion.
Here we take a closer look.
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What is dynamic currency conversion (DCC)?
If you’re using a credit or debit card abroad, DCC involves a retailer or restaurant owner giving you the chance to pay in pounds, rather than use the local currency.
This practice is becoming particularly prevalent in Europe.
While you may think it is helpful to have the bill converted into your home currency – so you know exactly how much you will be paying – the downside is that it will work out a lot more expensive.
This is because DCC gives the foreign retailer the opportunity to use an uncompetitive local exchange rate, meaning you end up paying way over the odds.
You also need to resist the temptation to withdraw cash from at ATM in pounds, rather than the local currency, as this is another situation where you can get stung.
If you get caught out by DCC, it can add as much as 5 per cent to the cost or withdrawal.
How big is the problem?
Worrying research from currency provider, Caxton FX, revealed that consumers are still getting caught out by this con – and that it is costing British holidaymakers up to an estimated £292 million in debit and credit card charges abroad.
In some cases the retailer may not even ask you before processing the transaction.
How to avoid falling victim
The best approach to avoid getting stung by this scam is to always check which currency you are paying in before proceeding.
The golden rule is to always ensure the transaction is conducted in the local currency, rather than sterling.
That way you can ensure there are no surprise charges on your bill.
Additional travel money tips
Don’t be afraid of using the calculator app on your phone if you are completely stuck. It is better to know exactly what you are spending before parting with any cash.
Order your holiday spending money in advance, and bear in mind that online rates tend to be more competitive. Whatever you do, don’t leave organising your travel money until the airport, as the rates can be a rip-off.
Note that you can get stung with a range of “hidden” fees for using many debit and credit cards overseas. Most banks will charge a transaction and withdrawal fee for both ATM transactions, as well as over-the-counter payments. Look into taking a card designed specifically for overseas use instead.
Consider a prepaid currency card, as these often offer a better exchange rate and fewer charges than debit or credit cards. Using a prepaid card can also make it easier to keep track of your budget.
Don’t get lumbered with unused currency. Ask your currency exchange provider if they will buy back your currency if you have some left when you return. But make sure you look around for the best deals.
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