Money tip #6 – Make your holiday spending money go further
With people seeking a respite from the UK's ice age they may not realise that they are making their winter get aways even more expensive than they need to be............
Increasingly more and more of us pay by credit card while on holiday abroad rather than use the more traditional travellers cheques or cash. Not only can you potentially save money by using a card but it also has the advantage of convenience and security which the other payment methods simply don’t have.
But, if you have shopped around for the best credit card deal for use abroad (one that does not levy a foreign exchange fee) you could still find yourself out of pocket when you come to use it, and be none the wiser!
This is because often when you use a card to settle a bill while abroad you may be given the option to have it presented in Sterling or the local currency. If you opt for Sterling the retailer will convert the bill into Sterling using their own exchange rate which will almost certainly be worse than the exchange rate that would have been used by your card issuer, had you paid in the local currency. But the galling thing is that the retailer pockets the difference. The practice is also now used at some foreign ATMs. This is not a scam but a legitimate practice called Dynamic Currency Conversion (DCC). The difference in cost can be as much as 4% but exact figures are difficult to come by.
While you should be given the option to decide the currency your bill is presented in there is a good chance you might not be. I personally encountered this while paying a hotel bill in Madrid. So in order to make sure you are not paying more than you have to:
- Always pay a bill in the local currency
- Refuse to pay a bill converted into Sterling, if you have not chosen to do so, particularly if the retailer makes excuses as to why you can’t pay in the local currency. In this instance either walk away or pay in cash.
In short, when it comes to settling a bill abroad just remember the old saying ‘when in Rome……’ and you should be OK.
While DCC will not necessarily bankrupt you, when you consider that a recent survey claimed that the average family takes nearly £3,000 spending money on a two week holiday you can see how much money there is to be saved.
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