When paying a restaurant bill by credit card in Spain this summer, I was asked whether I’d like to pay in pounds or euros. I said pounds – did I do the right thing? Mike, Preston

No Mike, unfortunately you didn’t do the right thing. Many people get caught out by this practice, which has become increasingly popular in shops, restaurants and at cash machines.

If you’re asked whether you’d like to pay in local currency or pounds, always choose the local option. Paying in pounds means that the seller’s bank has control of the exchange rate and it’s almost always worse, up to 10% lower, than you’ll get from your own bank or card issuer back home.

You’ll also find commission fees of up to 5% could be added to the transaction.

Always check hotel bills too – some foreign hotels are automatically calculating the bills in pounds without asking guests.

Some people also think that by paying in pounds, you’ll avoid the card transaction fees charged by your bank, which can be as high as £2.50 on every purchase. This is not always the case – you’ll incur these whether you pay in pounds or euros. And it means that a £2 coffee could actually cost you £4.50!

It’s worth avoiding paying for small purchases on a card because these fees can quickly add up. Alternatively, try to find a credit card like Halifax Clarity that doesn’t impose foreign transaction fees.

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