When you use a card to pay for something abroad, whether its a currency, credit or debit card, you are normally given the option of paying either in the local currency or in your own home currency.
When drawing cash out at an ATM/ cash machine it often actively encourages you to select your home currency by displaying phases such as “Choose your home currency to lock in your rate now and avoid any currency fluctuations”.
When shopping with a UK card, in France for example, you will be given the choice of paying for your purchase in Euro (the currency of the shop) or in GB Pounds. As you are handed the payment machine it will flash up a message along the lines of “Would you like to pay in local currency or in the currency of your card?”
And you pause and think “ ooh I know one of these is the right thing to do….
And then not be sure…
SO…..It might seem convenient, even sensible to choose to use your home currency but DON’T DO IT! NEVER, EVER!!
ALWAYS choose local currency and not your home currency. The reason for that is that it is YOUR bank that will handle the currency conversion. If you let the shop, restaurant or even their card machine operator calculate the conversion rate to give you a home currency figure then and there to select, they will almost certainly give you a very poor rate, far below market exchange rates.
Why? Because otherwise there is really no other reason for them to offer you the service! If they can make a profit on the card transaction as well as on the sale itself its so much better for them – they have just made double the money on one sale! In reality a shop can set any exchange rate they like and if you accept it, they will process it at that rate – you won’t be able to query it later. PLUS you will still be charged any relevant overseas transaction fees, it doesn’t help you avoid those either ! So it’s an easy profit for them at no gain to you at all.
For example, I recently drew out money at an ATM in Canada, the CA$203 processed as £119.42 – a rate of 1GBP = 1.7 CA$. However but the rate displayed that I would ‘lock in’ by having them convert it immediately was 1GBP = 1.55CA$, meaning they would have charged me about £130.96. Thats £11.76 on one transaction, an awful rate!
REMEMBER – always select LOCAL currency – the rate will be always be closer to the official market rate and more importantly there is no chance of you being deliberately ripped off by someone setting a fraudulently inaccurate exchange rate. The more a shop assistant or waiter tries to convince you to pay in your home currency the more likely it is that it is a potential fraud. Insist on paying on local currency – whilst a merchant can choose whether and which cards they accept, your card provider does not authorise them to to choose between local and home currency on your behalf – if they make the selection for you and present you with a transaction that is already in GBP then refuse to enter your pin and ask them to do it again. NEVER put your pin in without checking the amount and the currency.
So remember LOCAL currency every time!!