Foreign Currency - How to avoid being ripped off
Foreign Transaction Fees – how to avoid them
It has been in the news recently that Brits are being ripped off to the tune of almost £500 million per year (yes you did read that correctly – I almost couldn’t believe it myself! Just think how many more holidays you could get for that)
So here are some of my top tips on how to avoid being ripped off.
Having travelled extensively I only have 5 essentials with me – my passport, my driving licence, my phone, my credit card and my prepaid currency card – more about the latter two in a bit (sunglasses and an adaptor are handy too but you can always buy them if necessary)
I very rarely carry cash, except for small amount of the local currency of where I am going (it’s not necessary and in some parts of the world tourists can be vulnerable to pick pockets or thefts so the less cash you carry, the better)
Years ago, traveller’s cheques were a safer alternative to cash, but they are a dying breed and I haven’t used them for years (not even 100% sure many places other than banks would cash them these days and it still generally means carry cash with you once you cash them)
When abroad, shops, restaurants and even ATM’s now, offer you the chance to pay in either GBP or the local currency. This is referred to as dynamic currency conversion (DCC). My advice is - NEVER pay in GBP - ALWAYS select to pay in the local currency.
Why? Essentially, if you pay in GBP, you are being stung for more than one set of foreign currency transaction fees and never at the best exchange rate available. It has been calculated that each time you opt to pay in GBP in a foreign country, you are paying around 6% more than necessary.
There are some credit cards which offer ZERO fees on foreign currency transactions, so using one of the these to PAY for things abroad in shops, bars, restaurants is a great option as whatever you spend is converted at the going exchange rate, and it Is convenient and safe.
I am currently aware of 3 banks which offer a zero-foreign currency transaction charge - Halifax, Nationwide and B credit card from Clydesdale Bank – there may be more, so do your research.
Remember and pay off your credit card bill when you get home to avoid paying interest on your foreign transactions. Also DO NOT use credit card to withdraw cash – most banks charge fees and a much higher interest rate for this too, the ZERO foreign currency transaction fees normally only apply to purchases, not cash withdrawals.
Pre-Paid Currency Cards:
I discovered these about 15 years ago, and have used nothing else since. Not everyone has a credit card (or trusts themselves with one) and a pre-paid currency card is (in my opinion) THE BEST way to both save for and carry money abroad.
You can load it anytime you want (some offer an app where you can do it right from your mobile phone) so essentially saving up your spending money before you go. I now watch the exchange rate regularly and when I see the £ start to strengthen, I load my card. You don’t pay ANY fees, the rate you are offered at the time of exchange is the rate you get (and most often higher than you will get in any foreign currency exchange bureau) and you are not charged any fees for paying with the card abroad (essentially it is used the same as a credit card) or for WITHDRAWING cash from ATM’s. Some foreign ATM’s apply their own nominal charge to withdraw cash but not all – most place in USA do but I have rarely been charged a fee in any other country.
I find they are convenient and easy, and (I use CaxtonFX) if you ever need to contact them, they are efficient and their customer service is excellent. You can manage your account online, by phone or via a convenient app.
Some deal in multiple currencies (most major currencies including GBP), so you only need one pre-paid card but your account can have different currency balances and you can exchange between currencies too. This is great if you are travelling to some of the more obscure places as you keep a GBP balance and the rate of exchange is whatever it is on the day you spend/withdraw on your card.
Again, before you get a pre-paid card – do your research, some are much better than others. Choose one with good customer ratings.
In summary, if you plan on travelling – get a zero-foreign currency transaction charge credit card (whew that is a mouthful) and a pre-paid currency card. Take minimal amount of local currency in cash, and NEVER opt to pay in GBP when making purchases on your credit card or pre-paid currency card.
I tried to find a suitable stock image to use but decided to take my own - more authentic - would you agree?