When paying by card abroad, you are often asked whether to pay in pounds or the local currency, and the choice can cost or save you money. It seems helpful to pay in your own currency, but it usually is not. This guide explains whether to pay in pounds or local currency abroad. It is general information, not financial advice, so understand the principle and check your own card's terms before you travel.
The question you will be asked
When you pay by card or use an ATM abroad, the machine often asks whether you want to be charged in pounds or in the local currency. This is a common moment that catches travellers out, as the seemingly convenient option of paying in pounds usually costs more. Recognising this question for what it is, a choice that affects how much you pay, is the first step to making the right decision and avoiding an unnecessary charge on your foreign spending.
Always choose local currency
The simple rule is to always choose to pay in the local currency, not pounds. Paying in the local currency lets your own card or bank handle the conversion, usually at a better rate, while paying in pounds hands the conversion to the merchant or machine at a typically poor rate. Whenever you are offered the choice, selecting the local currency is almost always the cheaper option, making this one of the easiest money-saving habits to adopt when spending abroad.
What dynamic currency conversion is
The offer to pay in pounds is called dynamic currency conversion, where the merchant or ATM converts the price to pounds for you on the spot. While it sounds helpful, letting you see the pound amount, the exchange rate used is typically poor and may include a markup, so you pay more than if your card had done the conversion. Understanding that dynamic currency conversion is the mechanism behind the pay-in-pounds offer, and that it usually carries a worse rate, explains why declining it saves money.
Why paying in pounds costs more
Paying in pounds costs more because the conversion is done by the merchant's or machine's system at a rate they set, which usually includes a margin in their favour, rather than the more competitive rate your card provider would use. The convenience of seeing pounds comes at a price. Recognising that the pay-in-pounds option exists largely because it is profitable for the provider, not to help you, makes it clear why choosing local currency and letting your own card convert is the better deal.
The poor exchange rate
The heart of the issue is the exchange rate. Dynamic currency conversion typically applies a worse rate than the one your card or bank would use, so you receive fewer goods or less cash for your money. Even a small difference in rate adds up across a holiday. Our guide on getting the best exchange rate explains rates further. Understanding that the poor rate is the real cost of paying in pounds, even when there is no obvious fee, shows why local currency is the smarter choice.
Where you will be asked
You will encounter this choice in several places: card machines in shops and restaurants, ATMs when withdrawing cash, and sometimes online when paying a foreign merchant. The pay-in-pounds offer can appear wherever a foreign-currency transaction happens. Being alert to the choice in all these situations, and consistently choosing local currency each time, ensures you avoid the poor conversion across all your spending, not just at the till, including at cash machines where the same trap applies.
How to choose local currency
In practice, when the machine offers pounds or local currency, simply select the local currency option, even though the pounds figure might look reassuring. On an ATM, decline any conversion and choose to be charged in the local currency. It is a quick choice once you know to make it. Getting into the habit of always selecting local currency, and not being swayed by seeing a pound amount, ensures you consistently avoid dynamic currency conversion and get the better rate on every transaction.
Your card does the conversion
When you choose local currency, your own card provider converts the transaction to pounds, usually at a more competitive rate, and this appears on your statement. With a fee-free card this is often very close to the market rate. Our guide on using your cards abroad explains. Understanding that choosing local currency simply hands the conversion to your card provider, who typically offers a better rate, reassures you that declining the pay-in-pounds offer is the right move even though you see the foreign amount.
Any exceptions?
As a rule, local currency is cheaper, and there are few genuine exceptions, though in rare cases a particularly poor card might convert at a worse rate than a specific machine, which is unusual. For the vast majority of travellers and cards, local currency wins. Unless you have specific reason to believe otherwise for your card, defaulting to local currency every time is the safe, money-saving choice. The simplicity of always choosing local currency makes it an easy rule to follow without needing to calculate each time.
How to avoid the trap
To avoid the pay-in-pounds trap, simply remember to always choose local currency when paying by card or using an ATM abroad, and pair this with a fee-free card for the best results. Our guide on avoiding hidden fees abroad covers related charges. Making local currency your automatic choice, and using a good card, removes one of the most common and easily avoided costs of spending abroad, keeping more of your money for your holiday rather than handing it to a poor conversion.
It applies to online purchases too
The same choice can appear when buying online from a foreign retailer, which may offer to charge you in pounds rather than its local currency. As at a card machine, choosing the local currency and letting your card convert is usually cheaper. Being alert to dynamic currency conversion online, not just in person, and selecting the local currency where you can, ensures you avoid the poor rate on foreign online purchases too, extending the saving beyond your in-person spending while abroad or at home.
A simple habit worth keeping
Choosing local currency is one of the easiest money-saving habits to adopt, requiring no calculation, just a consistent choice each time. Once it becomes automatic, you avoid the pay-in-pounds markup on every transaction without thinking about it. Our guide on the best way to take money abroad covers the bigger picture. Making local currency your default choice, every time and everywhere you are offered it, builds a simple habit that quietly saves money throughout your travels for no effort once learned.
In short
When asked whether to pay in pounds or local currency abroad, always choose local currency. The pay-in-pounds option, known as dynamic currency conversion, usually applies a poor exchange rate set in the provider's favour, so you pay more. Choosing local currency lets your own card convert at a better rate. You will face this choice at card machines, ATMs and online, so always pick local currency, ideally with a fee-free card. This is general information, not financial advice.
Find more in our Travel Money guides.