Holidaymakers could unknowingly incur extra charges by answering a common question while abroad, as cautioned by renowned financial expert Martin Lewis. Lewis, known for his money-saving advice, highlighted the potential pitfalls of opting for currency conversion offered by foreign ATMs and card machines during a recent appearance on This Morning.
In most cases, Lewis advised travelers to select the local currency over pounds when making transactions abroad. He explained that when prompted to choose between pounds and the foreign currency at ATMs or card terminals, the decision essentially determines who handles the currency conversion process.
Specialist overseas spending cards often provide competitive exchange rates close to the interbank rate, making it advantageous to let the card provider handle conversions. Lewis emphasized that even standard debit and credit cards typically offer better exchange rates than those offered by foreign vendors, who may apply a substantial markup, sometimes as high as 6% or 7%, in addition to potential withdrawal fees.
The practice, known as Dynamic Currency Conversion (DCC), enables overseas retailers and ATM operators to convert transactions into pounds at the point of sale, but the exchange rates offered are usually less favorable compared to those from banks and card providers. Lewis also highlighted that some ATMs push for pound selections to boost profits for the operator.
His straightforward advice was to opt for the local currency over pounds whenever given the choice, whether in Europe, the United States, or any other destination. By following this guidance, travelers can avoid unnecessary charges and secure better exchange rates during their trips.