British travellers abroad are being overcharged by up to ?500 million per year by paying in sterling on card purchases.
Customers are often asked if they would like to pay in Sterling rather than local currency by retail outlets and even cash machines, which seems familiar and attractive to them. However, the exchange rates being applied to these transactions are very poor.
Analysis carried out by the BBC has found that these poor exchange rates amount to the equivalent of the customers being charged an additional 6 per cent per transaction, amounting to around ?500 million for UK travellers over a year.
Offering the option to pay in Sterling – which is known as dynamic currency conversion – is perfectly legal in the UK and Europe, providing the retail outlet displays the exchange rate being applied before payment is made.
However, critics of the practice have said that the rates are often shown in an unfamiliar way, and it is difficult to assess the true cost of an exchange rate on the spot.
In the Netherlands for example, the charges are so high that they are being investigated by Dutch consumer organisation Consumentenbond.
Many of the shops, cafes, and bars in the popular tourist city of Amsterdam offer the service, but it can cost tourists up to 10 per cent per transaction.
Sandra de Jong from Consumentenbond said: ‘Let me warn those that are being offered to pay by card and the shop owner says: ‘Would you like me to give you the exchange rate of what it will be in pounds’ – don’t do it.’
The UK government announced recently that credit and debit card fees will be banned from next year, and all consumer-facing credit and debit fees, which can be as high as 20 per cent, will be outlawed from next year under an EU rule change.
However, British travellers abroad still need to be aware of poor exchange rates offered.