Get more value for your pound on holidays

Many Britons are caught out by conversion charges they don’t anticipate

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The Independent Online

Sterling reached a five-year high against the dollar and a 20-month high against the euro last week. The news is good for anyone planning an overseas holiday soon – it means you’ll get more foreign currency for your pound.

But getting the best deal when spending abroad remains hugely complicated, with fresh warnings emerging this week from i readers that overseas retailers and hotels aren’t playing fair.

The problem stems from when you’re offered the choice of having your plastic card payment taken in the local currency, or in sterling. Most unsuspecting Brits plump for sterling on the basis that it must be more convenient.

But anyone who does so faces huge extra fees, explains Andrew Hagger of Moneycomms: “It’s catching many holidaymakers unaware and costing them more than it needs to make purchases overseas.

“They simply don’t understand what’s called Dynamic Currency Conversion (DCC) and that they are paying over the odds on the exchange rate without realising it.”

He points out that the majority of banks charge 2.75 per cent or 2.99 per cent for non-sterling transactions – in other words when you pay by plastic in the local currency.

“However, the DCC charges are sometimes as much as 6 per cent or 7 per cent, which is twice as much extra on top of what your bank is already charging.” That’s because the local retailer or bank can  set their own exchange rates  and charges on top of your own bank’s charges.

The golden rule, to help you avoid the unnecessary extra cost, is to always choose to pay in the local currency. But knowing about the dangers of DCC may not even stop you being hit by the extra charges.

One concerned reader contacted us this week to report that on many occasions in Spain, and recently in China, the retailer applied DCC and completed the transaction in sterling without giving him any choice or asking his permission.

That’s not right and if you’re hit by that you should be able to claim the extra costs back, says Mr Hagger. “I raised the question with the UK Cards Association which told me that the cardholder should be offered the choice to pay in the local currency, and retailers should not be charging in pounds without the permission of the cardholder.

“If people are not offered the choice, they are entitled to be refunded any commission or costs incurred because of the charge in sterling from their card issuer.” If you do get caught out this summer by this sneaky trick, contact your bank or credit card company.

That begs the question of what the best way to pay abroad is. If you’re a frequent traveller then it’s worth getting a credit or debit card with no foreign exchange fees.

Credit cards which don’t charge are issued by Capital One, Saga, Post Office, Halifax and Aqua. Debit cards with no fees include Cumberland BS, N&P, and Metro Bank. although local ATM providers may charge a fee.

“It’s generally a bad idea to use a credit card for cash withdrawals and particularly so overseas,” warns David Black of Consumer Intelligence. “Most credit cards have fees, as well as charging interest on the amount withdrawn – even if you pay off the entire outstanding amount when you get your next credit card statement.”

An alternative is a prepaid currency card which only allows you to spend cash you have already loaded on to it.

Get it now ahead of your break and you could effectively lock in today’s rates, which will give you 9 per cent more against the euro compared with last summer and 13 per cent more against the dollar.

Bear in mind that rates could improve but currency markets are fickle and sterling could slip out of favour, hitting your holiday cash.

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