British holidaymakers are paying almost £500 million a year in unnecessary charges when using their credit and debit cards overseas.
Shops, restaurants and cash machines are offering tourists the option of paying in pounds rather than the local currency and applying a poor exchange rate if they take up the offer.
The lower rates are equivalent to charging about 6% on each transaction, according to analysis for the BBC.
Currency trader FairFX found that on some transactions tourists can lose up to 10% by paying in sterling rather than the domestic currency.
The practice of offering a pay-in-sterling option is called dynamic currency conversion.
Most tourists are on their guard against being stung by high prices. What they don’t expect is that they could be trapped by the payment system itself, the BBC reported.
Dutch consumer organisation, the Consumentenbond, is urging visitors to take extra care.
Sandra de Jong, who speaks for the group, 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.”
A high proportion of shops and bars in Amsterdam offer dynamic currency conversion.
Dynamic currency conversion is sold as an extra convenience. But in practice, many British tourists are confused by the choice they are being offered.
Currency card and foreign exchange provider FairFX estimated how much people were being charged for dynamic currency conversion, by analysing its customers’ overseas spending.
Based on the average fee of 6%, UK travellers are being charged just under £500 million a year, the firm calculated.
Overall, one-in-five foreign transactions are affected, but in some countries and with some transactions the proportions are much higher.
At least half of the UK spend on cards in the Netherlands and Hungary is subject to the charges, and more than half of cash withdrawals in Sweden.
Thailand, Malta, Spain, Cyprus and Turkey all come high in the list of countries where people should be careful.
Dynamic currency conversion is legal in the UK and across Europe, as long as traders display not just the price but also the exchange rate being used before the payment is made.
But often the rate is not shown in the form British tourists are used to and most people find it hard to assess a rate on the spot.
“The way it is pushed is abhorrent,” says James Hickman from FairFX, “The amount they charge should be capped.”
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