The credit card mistake that will cost Brits £125m this summer
Filed under: Credit Cards
However, falling for the 'easy' option could cost you hundreds of pounds on your trip.
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The trapA survey by Caxton FX found that 40% of people would choose to pay in pounds if they were given the chance. They may also select this option if they were choosing to withdraw cash from an ATM while they were away.
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However, by doing this they expose themselves to something known as dynamic currency conversion (DCC). This costs them in two separate ways. First, the person you are paying will set the exchange rate themselves, so they may well set it at something that makes them a small fortune and costs you far more than exchanging currency in almost any other way. Second, your card company will load a charge of an extra 4% on top of the amount you are paying.
Assuming you spent £100 on eating out and entertainments every day of your holiday, a combination of DCC and a poor exchange rate, could easily cost more than £100 over the course of your holiday.
Why?James Hickman, Managing Director of Caxton FX said: "The number of people getting caught out by DCC has actually increased in the past year and a lack of understanding about the risk of associated charges seems to be at the heart of this. An extra 4% charge on every transaction could add up to some serious cash over the course of a two week holiday and some rather surprising bank statements upon return to the UK. However, DCC is a perfectly legal charge so it's up to the individual to make sure they are not being caught out by this."
Part of the problem, revealed by the survey, was that 15% of people are not confident with on-the-spot currency conversion (including one in five female holidaymakers). It also appears that the younger the individual, the less confident they are about mental arithmetic, with a fifth of 18-24-year-olds admitting to not being confident.
Protect yourselfThe answer may be to get your hands on a gadget or phone app that can take the hard work out of conversion, or go shopping armed with a calculator. You may feel a bit silly when you have to turn to your gadgetry whenever you want to buy anything - but you'll feel far less daft when the credit or bank statements arrives at the end of the month.
Hickman added: "It's tempting to overspend on holiday as it is, so a bit of pre-holiday planning and shopping around for the best currency deal before you head off will make sure your hard earned pennies go that extra mile."