If you’re away in Europe and you’ve just finished your meal in a restaurant or you’re picking up some souvenirs from the gift shop, you might decide to pay for it on your debit or credit card. When you’re doing this, the machine could ask you if you want to pay in pounds or euros. Is there a difference though, if you’re still going to get charged either way? Are you definitely better off with one or the other? Let’s take a look at what you should do.
The cost of pounds
Using your debit or credit card to pay in pounds when you’re in Europe is known as ‘dynamic currency exchange’. This means that the restaurant or shop’s foreign bank will do the exchange for you. In some cases you may be promised that there is 0% commission on the transaction. The problem here is the underlying exchange rate (which they are unlikely to tell you). If the exchange rate they use is poor, the transaction could be very bad value for money.
In some cases, as well as a poor exchange rate the foreign banks may also add an extra fee or commission to the transaction too making it even worse value for money. So stay clear of paying in sterling when in Europe!
Paying in the local currency using your credit or debit card is usually the way to go when you’re shopping abroad. The underlying exchange rate will be that used by VISA or MasterCard for the day the transaction is processed – which will be about as good as you can get as they exchange millions of pounds and euros every day.
On top of this you may be charged by your bank or card provider. For example thinkmoney charges 2% for overseas card purchases or ATM withdrawals – but this should still be cheaper than paying in sterling. However, with a bit of planning ahead you can avoid this charge too – by using a prepaid travel card.
Using a prepaid travel card
One of the cheapest ways to shop when you’re abroad is to get a prepaid travel card, where you load your spending money on it before you go. Typically these cards don’t add any extra charges when you shop or make ATM withdrawals overseas – so you are just paying the exchange rate cost. You could look at getting the thinkmoney Prepaid Travel Card®, which makes it easy to pay for your meals in restaurants or do any shopping while you’re away. You’ll also be able to use it to withdraw cash from ATMs and unless the cash machine has any extra fees, you won’t be charged for this.
You can load the card up with money before you go, which makes it easy to stick to your holiday budget. However, if you do need to add extra money onto it while you’re away, you’ll be able to do this online. To find out more about the thinkmoney Prepaid Travel Card, you can check out our offers page for existing customers.
The thinkmoney Prepaid Travel Card is issued by Wirecard Card Solutions Ltd (“WDCS”) pursuant to licence by MasterCard International Inc. WDCS is authorised by the Financial Conduct Authority to conduct electronic money service activities under the Electronic Money Regulations 2011 (Ref: 900051).