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Q&A: Should I pay in local currency or pound sterling?

by Sharron Livingston
Pound Sterling

When on holiday when paying for an item in a shop I was asked if I would like to pay in local currency or my home currency of pound sterling. Why do they ask this?

When paying by credit card abroad (or even taking money from an ATM) you may be asked how you would like to pay – in local currency or your home currency. In this case always opt to pay in the local currency. This is because if you pay in pound sterling you will be hit by DCC – Dynamic Currency Conversion. This type of conversion is notorious for offering poor rates and the merchant will apply additional fees.

Fees are often around six per cent but can be has high as 10 per cent. Over several purchases you may find your holiday costing you £100 more than you had expected.

Even if you think it is easier to track your spending when you pay in pounds consider the price you have to pay for this convenience.

Industry figures suggest that a third of UK holidaymakers use cards overseas, spending £26.4bn. The latest data from Fairfax FX reveals that 20% of card transactions overseas this year – and 24% of card spend – was subject to DCC to pay in pounds rather than local currency.

That means that a fifth of holidaymakers have been “duped” into paying up to 10% on every bill or ATM transaction.

Don’t be a statistic. Always pay in the local currency.

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