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Should you pay in local currency outside the UK?

Whether you’re buying a meal in a Spanish tapas bar or paying for a bus tour in the US, you may be asked if you want to pay in pounds sterling or the local currency.

It might be tempting to settle for the amount you’re offered in sterling (GBP), as it's the currency you know best. But in most cases it will cost you more.

Here's a guide to help you weigh up the pros and cons. 

What is dynamic currency conversion?

This happens if you choose to pay in your home currency rather than the local currency. It means the conversion takes place at the point of sale.

Dynamic currency conversion is sometimes known as DCC.

Paying in sterling

If you opt to pay in your home currency , you’ll know more accurately how much things are costing as you pay.

However, it can be more expensive as a shop or restaurant is allowed to set its own exchange rate to convert the amount you’re spending. They may also add extra conversion fees on top of this.

Some retailers are given an incentive to use DCC to earn more. This may be through a favourable exchange rate or extra conversion fees.

Explore: How do exchange rates work?

Paying in local currency

Research shows that in most cases you can save by opting to spend in the local currency. For example, that would mean choosing euros in Spain or dollars in the US.

When you choose to pay in the currency of the region or country you’re visiting, Visa or Mastercard will set the exchange rate. Your bank may also charge a fee to carry out the transaction.

The rate used by your card provider when paying in local currency will in most cases be lower than that of the merchant, or foreign bank, when paying in sterling.

Some retailers outside the UK might automatically assume you want to pay in pounds unless you say otherwise, so always double check the amount before paying.

Explore: Card fees and charges outside the UK