Why you should pay in local currency when using cards or ATMs abroad

Joanna Whitehead
Pay in local currency whilst abroad to avoid unnecessary DCC charges: istock

UK holidaymakers are forking out £490m in fees when using their payment cards abroad, according to research conducted by FairFX.

When using cards to withdraw cash or pay in shops and restaurants, customers are often given the option to pay in pounds rather than local currency. Some travellers may choose this option to keep better tabs on their spending, while others mistakenly believe it will cost them less.

Paying in sterling, however, incurs a Dynamic Currency Conversion (DCC) fee, which is imposed upon payments made using a card.

The practice enables the vendor or ATM to define the rate that is used to convert the transaction from the local currency back into pounds. Studies conducted by FairFX indicate that this conversion is charged at an average of 7.7 per cent of a transaction value.

This means that if you were to spend £60 on a meal for two, you could also face an additional charge of £4.62.

If you’ve made this mistake in the past, you’re not alone: one fifth of UK holidaymakers are also forking out unnecessary fees, according to the research.

Some 20 per cent of card transactions overseas and 24 per cent of card spend are currently subject to DCC for paying in pounds rather than local currency.

“When asked if they want to pay in pounds or local currency, opting to pay in pounds appears logical to holidaymakers as naturally they will think in their home currency,” says Ian Stafford-Taylor, CEO of FairFX. ”But be warned. This is nothing but a hyper-inflated rip-off, duping holidaymakers into paying unnecessary fees and accepting unfavourable exchange rates.

“The key thing to remember is, when abroad and asked if you want to pay in pounds or the local currency, always pay in the local currency to avoid nasty surprise fees.”