Abroad for Christmas? Avoid this expensive mistake

Written by: Paloma Kubiak
A typical family spending £2,000 on a Christmas and New Year trip overseas could be hit with an extra £140 in charges by using debit and credit cards incorrectly, analysis reveals. 

This is because choosing to pay in pounds rather than local currency can add as much as 10% to the transaction cost.

Dynamic currency conversion (DCC) enables retailers, hotels, restaurants and ATM providers overseas to let customers choose which currency they want to pay in.

If you choose the local currency, the more favourable standard MasterCard or Visa exchange rate is used. But if you pick pounds, you’ll be hit with rip-off exchange rates as the retailer’s bank sets the rate, often taking a slice of your cash for themselves.

Retailers and service providers claim cardholders like the familiarity of paying in pounds. However, many holidaymakers are unaware of just how expensive the wrong option can be.

How much could it add to a typical transaction?

Mastercard prepaid card users are protected from DCC charges after it blocked customers from paying in pounds abroad earlier this year.

However, the bulk of holidaymakers, including those with best buy no fees abroad credit cards, are subject to the DCC charge when opting to pay in pounds.

Andrew Hagger of Moneycomms calculated how much extra cardholders would be charged, based on an average 7% DCC.

He found they could be hit with extra charges of between £85 and £140 if they spent a total of £2,000 abroad.

Alana Parsons from international payments and foreign exchange firm Caxton, said: “Never pay in GBP when using your plastic overseas – if you say yes it’s the equivalent of agreeing to an extra 5% – 10% tax on your shopping, restaurant bill or cash withdrawal.

“DCC charges are supposed to cover the currency conversion, but some firms handling the transaction take an extra slice on top. In the worst cases this can add up to 10% to your bill or ATM withdrawal.”

She said cardholders should always decline and pay in the local currency whether for cash withdrawals or payment for goods or services.

The table below shows how much it would cost in pounds if cardholders opt to pay in euros:

The table below shows how much it would cost if cardholders choose to pay for the transaction in pounds:

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Big flu jab price hikes this winter: Where’s cheapest if you can’t get a free vaccine?

Pharmacies, supermarkets and health retailers are starting to offer flu jabs ahead of the winter season, but t...

Is now the time to fix your energy deal?

Fixed energy tariffs all but disappeared during the energy crisis. But now they are back with an increasing nu...

Everything you need to know about the pension triple lock

Retirees are braced to receive another bumper state pension pay rise next year due to the triple lock mechanis...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

The best student bank accounts in 2023: Cash offers, tastecards and 0% overdrafts

A number of banks are luring in new student customers with cold hard cash this year – while others are compe...

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Money Tips of the Week