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Which Currency should I use to pay?

1. Introduction and context
2. Which type of ‘buyer’ are you? Which parts of this article are for you?
All is relevant but if when travelling you
3. What destinations are good for UK travellers in relation to currency?
4. Biggest problems faced by travellers
4.1. DCC
4.2 Other overseas transaction costs
4.3 CASH: Currency that offer zero percent commission or have suspicious issues with their calculators
5. Some case studies and follow up best practice examples
6. Solution and how to avoid this issues (and the tools to help)
7. Some more tools that will help you
8. Conclusion

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Many of us got home after a holiday and realised that prices weren't what we thought they were. Did you just overspend? Or is it that you're just not paying the smartest way, in the right currency? If you live in the EU and travel to a country, not in the Eurozone, maybe you forget they use different money altogether. If you live in the UK, you have a different problem. Not every Euro was created equal. This leaves many travellers wondering where did all their money go? Is it just that this destination was expensive? How did you accumulate all of these international credit card charges? It begs the question: are you aware of how much your bank charges on purchases made outside the UK?
In places like Sweden, where you may be greeted with a 'God Morgon', your trip will need that little bit more of extra planning.
Option 2: (or a mix of the two)
It's holiday time, and like most of us, you have a limited amount to spend. You might do a little research, and you aim to get some good deals, but after the holiday you somehow end up opening your bank account to something completely unexpected. You end up asking yourself, 'Where did all that money go?' Maybe you overdrank, or over-ate or perhaps you just got carried away shopping. This happens to the best of us, but what if you're making losses in another way? Maybe your falling victim to currency exchange scams or just paying useless card and bank fees. Here, we will give you all the info you need to avoid this and get some extra bang for your buck.
Option 3:
You made it back to work from your dream trip, and you're still nursing your sunburn and possibly some tough Monday blues. You open your bank account, and you see endless charges on your card - Currency exchange charges as well as extra charges for withdrawals. Scratch that, there are unexpected charges on nearly everything you bought while abroad. Your friend rings, the one you just left at the airport. She's in a great mood and keeps going on about how cheap your holiday purchases were. You feel confused. How can you both be having different experiences? You ask her this, and she says, 'oh no - maybe you got scammed? Didn't you check with your bank or pre-buy currency?'. At this point, you are very frustrated and let out with a cry, 'No, Victoria I don't have a clue what you're talking about!'. In response, she says, 'I'll send you a link' and there you go, you have this article that will tell you everything you need to know. Well, what you needed to know before you took that trip. 'Geez, thanks Victoria, but better late than never.'
To avoid this scenario, read on.

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2. (Which type of 'buyer' are you? Which parts of this article are of special interest for you?)
All is relevant but if when travelling you
• Stock up on foreign currency (maybe store it in money pouch pack or a secret compartment of your bag?), if this is you - read the whole article to change this habit but also specifically section 4.3.
• Use bank cards abroad (Focus on section 4.1)
• Use credit cards abroad (Find the best one with tools in section 5)
• Use pre-paid cards abroad (Find the best one with tools in section 5)

Quick hacks – (how to achieve these below)
• Top 3 place to travel in Europe to get more back for your buck: Poland, Hungary and Croatia.
• Avoid using a debit card to make lots of small payments. Know the card charges beforehand. Talk to your bank before you travel!
• Get a travel-friendly credit card or multi-currency account.
• Don't let the zero commission exchange house fool you. Know your options. Do you know if your post office has a reasonable rate before travelling?
• Avoid the main currency scam (DCC) by paying in the local currency when you're abroad when using your card.

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3. What European destinations are good for UK travellers in relation to money? (Top 3)
Germany, the United Kingdom and France are the main destinations, but other countries are also favourable. Though this article has a strong focus within Europe, developing countries in Asia (especially South East Asia) are quite popular as well as of course Turkey. Turkey is by far the most visited developing country from Europe. It's easy to reach and has many reasonable all-inclusive offers. It makes for an excellent destination for some sun.
In any case, with the focus on answering the question - Here's a list of 3 to get you started (in no particular order)
Poland (Polish Zloty)
You can get to Krakow or Warsaw within 2 - 4 hours, depending on where in the UK you are flying from. You can do this with Ryanair, Wizz Air and easyJet cheaply or with a more expensive carrier like British Airways.
Though you will find many websites, saying it's very cheap, and it is, it's not stable. After Brexit, it's changed a bit, but you can still get a good hotel for about 50 pounds per night and a good meal for a tenner. So there you go, go explore the history, the national parks and eat some yummy Pierogi.
But wait what about the money part!
Key point: Be careful with the ATM with the DDC Charges (More below in Section 4).
So you can exchange currency in Poland in a bank, ATM, or Kantor (currency exchange service). If you're a credit card user, the most commonly used cards are Europay International, MasterCard, Visa, and American Express. If you have a card from a less famous vendor, find out if they can be used in Poland before you fly. Many banks will charge you a foreign transaction fee whenever you purchase something abroad; usually it's 3%. Check this first with your bank, same goes for ATM withdrawals. More on overall Currency exchange later on. It is important to understand the difference between currency conversion fees and foreign transaction fees.
Hungary (Hungarian forint)
It might not be as cheap as it used to be, but most travellers are still surprised how far their money stretches in Budapest. It actually extends at least one third further than in Western Europe. You can pick if you want to travel fancy or on the cheap with many different options. If you're going to gorge on fancy food and wine and stay in a famous 5-star hotel in Budapest, it'll cost you around 200 Euros. However, you can stay in a regular hotel or a more B&B style place for 40 Euros per night. In terms of money and cash, it's similar to Poland but a little bit further behind. Visa and Mastercard are the most widely accepted. Though please note that bank cards with microchips are not always excepted so make sure you have a card with a magnetic stripe in case. Like in Poland, be careful with the DDC Charges (more below).
Croatia (Kuna)
Visit the Pula, Split, Zadar or Dubrovnik. It's sunny, and the Dalmatian coastline is something else, with hundreds of islands sparkling in the sun. Let's not forget the fantastic coffee. You can fly over with EasyJet, and it's as easy as that. For reference, mid-summer (July and August) are the most expensive with the islands and coast being typically more expensive. Also, note that the exchange rate of the Croatian Kuna is fixed and tied to the Euro, but Croatia is not (yet) in the Eurozone. Without discussing the issues with having a fixed rate, suffice to say that it allows the government to make kunas more expensive for travellers to buy in the summer. Might be worth stocking up on these earlier in the year, when the prices are best.

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4. Biggest problems faced by travellers

So you've picked your destination, and you're travelling outside the UK. You have to use a payment terminal machine at a shop, and it displays something along the lines of: 'Do you want to pay or withdraw your home currency or the local one?'. Pick the wrong one, and you'll be unnecessarily wasting money.
Most people logically choose to pay in the currency they're used to, but it's a scam because by doing this, 95% of the time - you end up paying more. DCC is a practice called "dynamic currency conversion". Like mentioned, it's when travellers are asked whether they want to pay in their home currency when abroad/travelling. Research from German testing organisation Stiftung Warentest, found that consumers are almost always losing out when they pick the home currency option. A study by a Norwegian bank covered 1,500 transactions by Norwegian customers abroad. It estimated the average charge costs UK consumers £500m a year. This paints a similar picture to the Indendepent's verdict that UK travellers are losing £1m per day through "dynamic currency conversion" (DCC). Research from German testing organisation Stiftung Warentest found that consumers are almost always losing out when they pick the home currency option. Added to this, they discovered that DCC charges at ATMs between 2.6 and 12%– with the highest rates in the Czech Republic, Poland and Hungary.

4.2 Other overseas transaction costs (UK Banks)

Make sure you're up to date with all the jargon:
• When you buy something:
You usually pay a non-sterling transaction fee.
It applies every time you pay with your card. According to consumer Group' Which?', the worst cards are Halifax, Lloyds Bank, Santander and TSB because they add a non-sterling purchase fee on top, often of fixed value (e.g. £1.50) but note that it can also be a percentage of what you spent.
• When you withdraw money:
You also incur non-sterling transaction fee for the conversion as well as a non-sterling cash fee (as a flat fee or a percentage).

Essential tips: Avoid using a debit card to make lots of small payments, as the charges can quickly escalate unless you have one of the fee-free cards. Try to make fewer trips to the ATM and withdraw more significant amounts if you do have a bank that charges ATM fees. Out-of-network ATMs may be an option, but they might charge possible foreign transaction fees, so ensure you check your options. Sometimes even within the EU zone, private banks will charge an extra fee so if you do run into one of these, just walk to another one. Chances are it won't be a private bank, and it won't cost you a thing to withdraw cash (especially true in the Eurozone).
• But remember not all cards were created equal either (More on that Section 7).

4.3 CASH - Exchange: not the best option to make it rain.

Once you've reached your destination, finding a good deal may be harder than you thought. If you need fast cash, you'll get the worst deals at the airport and at your hotel. Your banks ATM network is the best option.
Some people will argue that currency exchange houses that offer zero percent commission are the way to go, but we're telling you now they won't benefit you in the slightest. Zero commission means nothing at all. Most money changers make their money from the difference between their cost price and the rate that they charge you. Many also tend to have suspicious issues with their calculators or can trick you by double counting. If you do use a money house, stay vigilant. You can checkout the bureaux de change.
Side note: What about the good old post office?
The Post Office can actually offer you a reasonable exchange rate, at many locations. They have over 70 currencies available to order online or collect at 11,500 branches across the UK. You can order online for home delivery or collection or just walk in and buy it. Though many banks still outdo the post office, in some cases it's still quite competitive. The Post Office has tiered rates and also have regular flash sales on popular currencies.
So as we can see, the Post Office rates are not the worst option.

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5. Some quick case studies on DCC
• A cross-border transaction from Bulgaria (not the Eurozone) to Finland (which uses Euro) in Euros is currently priced at between €15 and €24. If one transaction is done with DCC and the other one is not the difference can be over 2%. Though this difference may not seem too big of a deal for the customer, it does accumulate as a cost and can also be a substantial income stream for the DCC provider and merchant.
• A small mystery shopping exercise carried out by Slovene consumer organisation Zveza Potrošnikov Slovenije in 2018 revealed that in Croatia most ATMs offer DCC. On average, consumers were up to 8.7% worse off when opting for DCC.
• A Norwegian survey found that DCC service at a foreign ATM or at a merchant's terminal is designed to guide the consumer towards choosing the DCC service through using different colours, size of buttons or flashing signs. Don't be fooled!

So to make a more explicit:
A tourist from the UK is travelling to Budapest. He buys something worth 10,000 Hungarian Forints (HUF). He chooses to use his debit card, so the machine asks 'Do you want to pay in a) your home currency or b) the local currency' in this case HUF. If you choose a) it will be a worse rate as it's the exchange rate used by the retailer's bank. On the receipt it will show, say, 1 Pound sterling equals 368,14 Hungarian Forint, so it will say the cost is 27.16 Pound sterling which will show on the bank statement. However, if you choose b) it will be a better rate because they will take the exchange rate used by the consumer's bank. The receipt will just show the amount in HUF, and the bank statement will show around 24.4 Pound sterling due to being converted at a better rate. Dynamic currency conversion can be up to 10%, which means it can go up to a massive 10% more cost if you're especially unlucky.

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6. Some Tools that will help you pick a sound card
Investigate your options to get a new card. Banking with an institution that has international branches and ATMs means you may be able to withdraw cash with low fees (1% to 3%) or perhaps no fees. This is what you're looking for.
Some also partner with institutions in different countries. Use your bank app to check this. Like it was said above, as long as your card is activated to make overseas purchases, exchanging through your bank tends to be the best option. However, there is also the option of having a Multi-Currency Account or a prepaid (loaded) card, which is especially useful if you're travelling to a country with a 'fixed rate' like Croatia.
• Aim for commission-free rates with the 'live' rates on your mobile app, ask your bank for more details or compare prices to a leading site. You can also open a Multi-Currency Account.
• Get the best credit card with the best rates or a specific travel-friendly card. Start by checking out:
Which? - Best cards to use abroad
Latest from Moneyunder30 - Best Travel Rewards Credit Cards of 2019: Snag Up to $750 in Travel
• Prepaid debit card. You load cash on it before you travel and use it as a debit card. You get the rate the day you loaded the card not when you spend. This tends to better as currency fluctuations, which can leave you with a worse deal. However, make sure you are aware of where overseas they accept them.
Latest from Money Saving expert - Prepaid Travel Cards: Lock in a top rate before you go.
• Online banks like Revolut: Your Digital Banking Alternative (No fees) - Full list for 2019 here.

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7. Conclusion
We need new legislation that brings down the costs of transferring Euros (or pounds) across the EU, including in non-Euro countries. Consumers currently pay high fees for these transactions. A Consumer organisation, BEUC, explains that if you would have new regulation on this, a Croatian consumer who transfers Euros to Italy will be charged the same fee as for a transfer in Kuna made within Croatia. This will be particularly helpful as most cross-border transactions in non-Euro area Member States take place in Euros. It could mean huge savings for consumers. Nevertheless, if the consumer has a bank account in the local currency, the bank will take conversion fees which are not regulated. Not particularly helpful to the UK at the moment, but the EU Economic Affairs Committee wants to give consumers the possibility to block currency conversion services on their cards when abroad. Let's see what the new EU Institutions bring us 2020 onwards.
In the meantime - use the five tips above avoid losing money on your holiday.
• Avoid all currency exchange fees by getting a card with no foreign transition fees.
• Withdraw from local ATM. Do this as long as you check with your bank first and have a bank which waives foreign transaction charges.
• Time your purchase of cash. Track the currency and your destination pick wisely. If you use the post office, keep an eye out for deals.
• Have a basic understanding of the currency so you can do a simple calculation in your head without pulling out your phone.
• Try to buy and pay for travel equipment, hotels and tours at your travel destination so you can pay at the local rate.
AVOID DCC BY: Always pay in the local currency when you're abroad when using your card.
In case the charge isn't converted on your card, it might be a good idea to take photos of the original receipts – showing the purchases made in the local currency. Then you can refer to it again with your bank in case there is a mistake.