Prepaid currency card users to be protected from hefty foreign exchange fees
Many shops, restaurants and ATMs overseas offer ‘dynamic currency conversion’ (DCC) which lets you choose between paying in the local currency or in pounds.
While the instinct for British holidaymakers may be to pay in pounds so they can see exactly how much they are spending, the advice is to always opt for the local currency to avoid hefty fees and uncompetitive exchange rates.
DCC means banks of local businesses can use their own currency rate to exchange your pounds and this rate is almost always worse than the one you’d be charged had you chosen to pay in local currency.
The good news is that from Friday 12 April, people with Mastercard prepaid currency cards, such as Caxton FX and Revolut, won’t have to remember the best way to pay as they will only be able to pay in the local currency.
A Mastercard spokesperson said: “We’ve recently made changes to our prepaid programmes. Dynamic Currency Conversion will no longer be offered for prepaid multicurrency Mastercard cards, as these cardholders have predetermined the currency they wish to pay in, before they travel and any purchases are made.”
The new rule will only apply to prepaid currency cards. Mastercard debit and credit card customers will still be offered the option of paying in pounds.
Caxton FX, which has been working closely with Mastercard, said it welcomed the news.
Alana Parsons, chief operating officer (COO) at Caxton FX, said: “There is a real lack of consumer awareness around Dynamic Currency Conversion (DCC) charges with a staggering number of people getting caught out at the cash point, and when they’re generally paying for holiday expenses in restaurants, cafes, hotels, and shops. The new Mastercard rule on prepaid currency cards offers greater protection for consumers and helps avoid any confusion about DCC at the point of sale for cardholders.
“When faced with the option to pay in the local currency of a travel destination or in pounds, it appears easier and convenient to pay in pounds at first glance, but hidden DCC charges can typically add anything between 5-7% onto a bill, so always pay local, no matter what method of payment is used!”