Cash machine gave me its interest rate
I had a surprise this weekend when withdrawing cash out of an ATM in Spain. What wasn’t unusual was the fact it asked me if I’d like to be debited the amount in pounds or euros, but for the first time when doing so it actually told me the rate and I’m going to need to rewrite part of an article because of it…
This is all to do with what’s officially called dynamic currency exchange, let me nick my explanation from the cheap travel money cards guide:
“Q. If I’m abroad spending on plastic & they offer to let me pay in pounds, is it worth it?
A. No. This is called dynamic currency exchange, and should be avoided. Often the rate you get will be appalling and someone’s making big money out of it. If you’ve got one of the specialist overseas cards you’ll get a much better rate paying in the foreign currency not pounds. And even if you’re using a normal card, as you’ve no idea of the relative exchange rates they could be playing you for a fool; so it’s always best to stick with paying in the foreign currency.”
That’s always been my line, and it remains intact, however the following paragraph in the article is now going to have to be re-written…
“If you’re travelling to Spain, be especially careful. Some Spanish banks, particularly giant Santander, have started to ask UK cardholders if you want to have your money converted into Sterling when withdrawing Euros from ATMs. Always say No; the rate you’ll get is often much worse than the rate you’d be given by your own plastic provider when it converts Euro withdrawals, although the exact rates depend on which plastic you’re holstering. “
So what’s changed…
This weekend the machine actually told me that it would “add a 2.5% commission” if I chose to pay in pounds. This is the equivalent to the load that your card charges you when you spend overseas.
In other words the banks themselves get the best possible exchange rates, yet they add a commission/load on top. So if I’d withdrawn £100 worth of Euros and paid in pounds it would’ve cost me £102.50.
As I was using one of the four load-free specialist travel money cards (see the cheap travel money cards guide for a list), I was better off paying in euros and letting the card do the conversion.
Yet this 2.5% commission is actually slightly lower than the typical 2.75% to 3% which most debit and credit cards charge. Therefore if you’re using one of those it would actually have been cheaper for most people to pay in pounds – the opposite to the old advice.
Now I’d still suggest unless you’re given the actual ‘load’ in any dynamic currency conversion, you opt to pay in the foreign currency not in pounds – as when it’s an unpublished amount the exchange could be horrid, yet I will be changing that paragraph in the guide.
P.S. The weather in the South coast of Spain was lovely though we were only there for a quick two day break. We actually ended up booking as I was filming at Stansted for a budget airline programme for ITV, and thought as I’d made the trip anyway might as well take advantage of a quick flight from Thur night to Sat night.
Now the Tonight producer Lisa was quite cunning when she heard this, bringing a small camera to give to me and Mrs MSE asking if we’d mind taking a few diary cam notes of the trip as it’d help the film. We actually had a bit of fun doing that together so I didn’t mind too much – not sure any of it will make the final cut though.
The other big benefit is as I’m on a fitness kick at the moment I took advantage of being on a break to attempt to run my first ever 10k (never done more than 6k before) at the gym linked to where we were staying, managing it 49 minutes of which I’m seriously chuffed!
