DYNAMIC CURRENCY CON-VERSION

Just say ‘no’. That’s the safest advice when a shop, hotel, car hire office or cash machine outside the UK asks ‘would like to pay in Sterling?’ If you say ‘yes’ then the local bank does the currency exchange and both it and the retailer add a bit on for their own profit. That means the exchange rate will be worse than the rate that Visa or Mastercard charges you on your credit or debit card. And the fees and commission may also be worse than any charges your own card makes for ‘foreign usage’.

The system is called ‘Dynamic Currency Conversion’ and was put in place by both Visa and Mastercard following demand by foreign banks and retailers. Rather than taking the payment in local currency and letting Visa and Mastercard take the profit, they wanted to do the exchange in real time at the till. Visa and Mastercard put the system in place and now claim the scheme offers customers ‘choice.’

They both speak of ‘transparency’ for the customer. But in fact the cost of saying ‘yes’ is withheld until after the deal has been agreed. The exchange rate and any fees or commissions are only revealed when the receipt is printed when it is too late to cancel.

The one safeguard is that customers have to give consent. So the authorisation process on the card machine will include a question asking if you want to pay in Sterling. If you are not given the choice or if the receipt does not tell you the exchange rate and other costs then the transaction can be reversed later and processed as if you had not given your consent. So if you think you have been pushed into agreeing keep your receipts and check your statement when you get home and complain to your bank or card provider.

Of course, even if the retailer did tell you the cost of conversion before you agreed you still could not compare it with the cost of paying in local currency and letting Visa or Mastercard do the conversion. Exchange rates vary hour by hour and your own card provider may well be loading charges on too. So pick a card that makes no or low charges for foreign use (Post Office, Thomas Cook, Nationwide, Saga) and when offered the choice of paying in Sterling abroad politely but firmly say ‘no’.