Holiday travelers face cash machine dilemma
With the summer holiday season just around the corner, travelers have many issues on their minds. Where to take that holiday. Which clothes to pack. How to handle foreign exchange transactions once at one’s foreign destination.
Well, not everyone thinks much about that last item, but it would be a good idea to consider the options before you are standing in front of a cash machine, five or six other tired tourists in line behind you, with the machine asking you whether you want to be charged for your withdrawal in pounds or euros. What you decide will have an effect on how much you have to pay for the transaction.
If you decide to be charged in euros, the machine will charge you your bank’s rate back in the UK. You will likely not know what that rate is. Pay for the transaction in pounds, and the machine will tell you how much the transaction will cost you, using the exchange rate of the bank whose machine it is. Either way, your home bank will likely charge you for using a foreign machine.
The issue is serious enough that the Office of Fair Trading is looking into this sort of transaction, called Dynamic Currency Conversion, as part of its investigation into bank transparency, or the lack of it, and whether “free” banking is a myth. There are huge variations in what UK banks charge for such transactions, and figuring exactly what that withdrawal at a foreign cash machine will cost you can be tricky. So, it is a good idea to find out ahead of time the approximate exchange rate your bank will give you, even though this might well change by the time you reach your destination, as well as what kinds of charges your bank could levy for using a foreign cash machine and how much those charges are.