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Page last updated at 13:05 GMT, Saturday, 20 June 2009 14:05 UK

Currency conversion warning

By Bob Howard
BBC Radio 4's Money Box

Some people are losing money when using their credit cards abroad as a result of changes which were supposed to increase consumer choice.

Euro notes
Retailers should ask which currency you prefer to pay in.

It happens because in some European countries purchases or cash machine withdrawals can be billed directly by the retailer in pounds instead of in the local currency.

They are supposed to clearly ask you for your preference, but that is not always happening, causing customers to lose out in the process.

Kirsty from Warwickshire regularly hires cars abroad.

When she was in Spain for a short break she went to a local office of the car hire firm Centauro to pick up the car she had reserved online.

... they're making a tidy little profit at our expense.
Money Box listener Kirsty

She was asked to pay a deposit of 350 euros on her credit card but did not check the receipt she had been given until she got home.

To her anger and surprise, the 350 euros she thought she had paid, had been changed into sterling at an exchange rate set by the car hire firm's bank, not her own.

When she looked at her credit card statement, she realized that whilst the company took the deposit in pounds, it paid her back four days later in euros.

She told Radio 4's Money Box programme that once that was converted into pounds, the difference between the car hire company's conversion and her own bank's meant she had lost £17 simply to provide a deposit.

"If they're doing this to every customer, everyday, for every car hire, they're making a tidy little profit at our expense."

"That's like giving customers the small print after they've signed on the dotted line."


Centauro says its present deposit system is temporary and its employees are instructed to tell customers about the choice before the transaction.

It has offered to pay Kirsty back the £17.

... the transaction can be reversed and then put back through the system in the original currency.
Neil Horseman, Visa Europe

Sandra Quinn, from the UK Cardholders association, believes anyone in Kirsty's position could also argue they had not effectively approved the transaction in the first place and could ask their card company to intervene.

"We wouldn't regard that as authorized. When you're agreeing to a transaction, you're agreeing to the currency of the transaction. This wouldn't appear to have happened in these types of cases."

Neil Horseman, vice president of marketing for Visa Europe, agrees that banks can insist their customers do not lose out in these sorts of cases:

"The card holder's issuer has full recourse to "charge back", so effectively the transaction can be reversed and then put back through the system in the original currency."

Kirsty's Visa credit card was issued by the Nationwide Building Society.

When Money Box asked if its customers had a right to demand the transaction go through in the local currency, Nationwide initially said the chance of success was "slim."

Nationwide has since confirmed that it could make this request on behalf of its customers.

Lack of clarity

The confusion is symptomatic of the lack of clarity throughout much of the industry about how this whole process is supposed to work.

The golden rule is say euro, never accept the pounds option.
Martin Lewis, Moneysavingexpert

Jeremy Wood, Nationwide's divisional director of consumer finance, says this system, known in the industry as dynamic currency conversion, is flawed:

"It is untidy and it's not necessarily consumer friendly. In the vast majority of cases electing for dynamic currency conversion is not in the customer's interest."

Martin Lewis, the creator of the website Moneysavingexpert, agrees this sort of currency conversion almost never benefits the consumer:

"Before you sign and accept payment, double, treble, quadruple check which currency you're paying in. The golden rule is say euro, never accept the pounds option."

BBC Radio 4's Money Box was broadcast on Saturday 20 June at 1204 BST.

Money Box



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