It might seem progressive that you can choose to pay bills and withdraw money in your home currency, but you would be walking into a tourist trap if you do.
When it comes to withdrawing money or paying for goods abroad, there is one rule of thumb to always remember: opt for the local currency.
You may not know this, but you’ll automatically be charged a 5% markup if you choose to pay in pounds sterling,while abroad and the same applies to cash withdrawals as well. This is due to a staggeringly well-hidden policy called Dynamic Currency Conversion, or DCC for short, but that’s not where the issues end. In addition to DCC, you will also be faced with a credit or debit card surcharge, which is applied regardless of whether you pay in the local or your home currency.
Let’s put this into context for you. Were you to spend £1,000 abroad, with DCC added, the total would come to £1,050 and that’s before any bank charges are added. These added costs clearly add up quickly, but why would the option to pay in pounds sterling even be offered, given that it is so economically unviable? The answer is that many outlets actually take a cut from the DCC option, meaning that it is absolutely in their best interest to persuade you to pay in pounds and not the local currency.
What’s the solution?
If you want to travel without the fear of racking up extortionate DCC and bank charges, your best bet is to ask your bank about the option of a fee-free debit or credit card, as well as always choosing to pay for goods in the local currency. This means that you will know exactly what you are paying at the time of purchase and won’t come home to a statement filled with unreasonable or unexpected charges. Naturally, credit cards will still incur interest, from the time of purchase or withdrawal from a cash point, but at least you can be sure that you’re staying on top of your spending.
Points to remember:
- Always pay for goods and withdraw cash in the local currency.
- Don’t be talked into paying in pounds, as you WILL be charged DCC.
- Apply for a fee-free debit or credit card prior to travelling