Holidaymakers are set to waste £160m in card charges
The survey revealed that 40% of Brits would rather pay for goods in pounds when using their debit or credit card instead of the local currency when abroad, exposing themselves to poor exchange rates and additional charges as a result of dynamic currency conversion (DCC).
DCC occurs whenever someone opts to pay for goods, or enter the amount they wish to withdraw from an ATM, in British pounds rather than the local currency.
A further 18% admitted that they wouldn’t know which currency to choose when given the option, with the percentage was much higher in the younger 18-24 age group.
James Hickman, Managing Director of Caxton FX said: “The number of people getting caught out by DCC has actually increased in the past year and a lack of understanding about the risk of associated charges seems to be at the heart of this.”
Typically, payments made on plastic will be charged around 4% extra for using pounds, and often the exchange rate is worse as it can be set by the merchant putting through the payment.
An extra 4% charge on every transaction could take out a huge chunk of holiday cash over the course of a two week break and some unpleasant bank statements waiting on the doormat after the holiday. However, DCC is a legal charge and Caxton FX state that it is up to the individual to make sure they are not being caught out by this.
As purse strings tighten and the average household disposable income decreases, the luxury of a summer holiday is a significant investment for many Brits but Caxton FX’s research found holidaymakers’ budgets are not spreading as far as they should.
The research revealed some 15% of holidaymakers take the risk on local exchange rates, and change currency after they reach their destination. While more than a quarter, expose themselves to bank charges by using their debit card abroad.
Hickman added: “Using your debit card abroad could expose you to a charge from your bank on every transaction, on top of a less than favourable exchange rate. Additionally, using ATMs at the destination airport or changing money at your resort are some of the worst options for consumers. Usually, the exchange rate will be very poor and each withdrawal can cost upwards of £1.50!”
“It’s tempting to overspend on holiday as it is, so a bit of pre-holiday planning and shopping around for the best currency deal before you head off will make sure your hard earned pennies go that extra mile. Using a prepaid currency card will help ensure you get a good rate and allow you to budget more efficiently. However, if you do find you need to use your debit card abroad, make sure you’re withdrawing large sums to avoid the flat fees per withdrawal.”
The research also found almost 1 in 5 adults aren’t confident enough in their maths skills to calculate how much they are spending in a foreign currency when on a summer holiday, with female holidaymakers less confident than their male counterparts with on-the-spot currency conversion.
It also appears that the younger the individual, the less confident they are about mental arithmetic, with a fifth of 18-24 year olds admitting to not being confident, compared to just 12% of those aged 55and over.
Caxton FX’s top money saving tips this summer:
• Don’t be caught out by DCC – ALWAYS pay in the local currency
• Get organised and order a pre-paid currency card, like a Caxton FX Europe Traveller, in advance. This can help you budget and pre-paid cards typically offer a better exchange rate and fewer charges than using your debit card
• Don’t be embarrassed to whip out the calculator on your phone if you get stuck; it’s better to know what you’re spending than risk extra charges by paying in pounds