The great holiday money rip-off

With British holidaymakers set to spend more than £4billion on their plastic this summer, this exchange rate trick could see cash-strapped families having to pay hundreds of pounds more while they are away.

Bob Atkinson, travel expert from holiday comparison site Travelsupermarket, says: ‘Sneaky shops and restaurants are increasingly charging tourists in sterling, knowing that people feel more comfortable with transactions in their own currency. But this is a huge rip-off.

‘The golden rule when abroad is always pay in the local currency, never pay in pounds and pence.’

Card giant Visa Europe estimates 2per cent of all overseas transactions made by Britons were converted by retailers into pounds.

Industry insiders believe the vast majority of these would have been in large tourist resorts.When you pay for a meal or shopping overseas using a credit or debit card, you’re supposed to be given the bill in the local currency.

On occasions, you may be given the choice of paying in sterling. This is where overseas retailers and restaurants make their mark-up.They will add 5per cent or even more to the bill — usually without telling the customer. The retailer pockets the entire 5per cent.

Frequently, this mark-up will not even appear on the bill. Instead, it may appear on the card receipt in small print, by which stage it is too late to complain. Some cash machines run by overseas banks also use the same trick, known as ‘dynamic currency conversion.’

Instead of offering the cheaper Visa or MasterCard rate, the transaction is converted into sterling there and then, using a poor exchange rate set by the bank. There is no limit to how much banks or retailers can charge, and no consumer protection for people who later realise they have been ripped off.

Mark Bowerman, spokesman for trade body the UK Cards Association, says: ‘Paying in sterling may be appealing because you know exactly how much will appear on your bank statement.

Action to take

  • Insist on all payments being in local currency.
  • There are credit cards which do not charge a fee for withdrawing cash, but you will be charged interest from the moment you make the transaction.
  • The best fee-free cards are Halifax Clarity, which typically charges 12.9 per cent interest, and Santander Zero, which charges 27.9 per cent.
  • Nationwide, Post Office, Saga, Santander Zero and Halifax Clarity, don’t have fees for purchases.
  • Alternatively, you can use a pre-paid credit card. You load up a plastic card with a currency of your choice at a set exchange rate. You can then use the card to pay or withdraw cash wherever you see the MasterCard or Visa logo.
  • The Caxton FX and FairFX card are among the cheapest. These, unlike many others, do not charge a fee for purchases.
  • Prepaid cards sold by travel agents may be expensive. You can compare the best deals on a comparison site, such as