Should I Pay in Euros or Pounds? (Online & Abroad on Holiday)

When traveling abroad in Europe (or shopping online on foreign websites), you have no doubt been confronted with a sneaky question: pay in euros (EUR, €) or pounds (GBP, £).

When in the Eurozone, you should always choose to pay in Euros — the local currency. 

This principle of paying in the local currency applies around the world too. When you bring your British bank cards to the United States, opt to pay in US dollars. When in Japan, pay in Japanese yen, etcetera. 

Below, we’ll explain the horrible hidden fee that you’d pay if you chose British pounds instead. We will also provide the best UK travel cards, like Starling Bank and Revolut, to avoid foreign fees on your next holiday. 

Is it Better to Pay in Pounds or Euros on Holiday Abroad?

Britons should always pay in euros (€) when using their cards in the EU.

When in doubt while on holiday, always pay in the local currency (USD in the United States, AUD in Australia, CHF in Switzerland, and so on).

Should I Pay in Euros or Pounds Online?

The same principle also applies when you use your British cards to make a purchase when shopping online with a foreign vendor. Pay in the local currency of the vendor.

For example, I remember paying for a Swiss International Airlines flight directly on Swiss Air’s website. As a Swiss company, their local currency is the Swiss franc (CHF). At checkout, the default currency that was used was indeed their local Swiss franc, and I proceeded with the transaction. 

Some online checkout platforms, like PayPal, give you the option to denominate your purchase in your home currency (GBP). Stay diligent by confirming the jurisdiction of the company you are doing business with and confirming the local currency used by that company.

What is a Dynamic Currency Conversion (DCC)?

A dynamic currency conversion is a conversion from your home currency to the local currency of the foreign vendor/ATM abroad. 

These conversions are always optional. If you choose to pay in your home currency rather than the local currency, then the conversion will be applied at the point of sale.

How Much is the Dynamic Currency Conversion Fee?

The fee that you will pay when you consent to a DCC is a hidden exchange rate markup, also known as an exchange rate margin. It is not a fixed service fee or percentage fee.

It's important to know that the real mid-market exchange rate is the live market price that any two currencies trade at. This is the ideal rate you want when buying, trading, or exchanging foreign currencies.

When you accept the DCC, the bank of the vendor or the ATM abroad will set a weaker rate instead (often as bad as 7% to 12% weaker). They’ll pocket the difference. 

Why Do Machines Ask Me to Pay in Euros or Pounds?

This happens whenever you present your British bank’s debit card or credit card to ATMs and vendor’s pay machines abroad. European machines recognise that your British card is linked to foreign currency balances (GBP). 

Locals, on the other hand, will not be confronted with the DCC option. Machines in the EU recognise that the local’s card is linked to euro balances, and they simply process the transaction domestically in euros. 

Is it Cheaper If I Choose to Pay In Euros?

Yes, it is cheaper to pay in the local currency of the EU. Since your British debit card or credit card is linked to your pound balances, your pounds will need to be converted into euros (the local currency). Your card’s network (Mastercard or Visa) will apply their own exchange rate. 

Unlike exchanges rates applied during DCCs, the rates from Mastercard and Visa are far more transparent and much stronger. You can track the Mastercard rate (monitor here) and the Visa rate (monitor here), both of which usually hover around 0.2% to 0.5% weaker than the real mid-market exchange rate. 

How to Avoid Foreign Currency Fees On Holiday in Europe 

Here are three things to consider when spending on holiday:

1. Get a travel card: First, inquire to your bank or credit card company about debit cards and credit cards that waive foreign transaction fees. Otherwise, you will typically be charged a fixed 3% per transaction done abroad, which piles up very quickly. You can read our guide for the best debit cards with no foreign transaction fees for international travel.
2. Pay in the local currency: As mentioned above, the next step is to always pay in the local currency (EUR in the EU) whenever asked. 
3. Consider a multi-currency card: Lastly, you can avoid exchange rate margins and DCCs altogether by signing up for a free multi-currency account. See how they work below.

3 Best Multi-Currency Travel Cards in the UK

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Multi-currency accounts let you hold balances of euros, US dollars, British pounds, and many more. When you load euros onto these accounts and have a holiday in Europe, both merchants and ATMs will treat your multi-currency card like a local’s card. 

When you spend abroad, you’ll never be asked to pay in either EUR or GBP. You’ll also avoid Mastercard or Visa’s small exchange rate markup because your purchase will be processed as a simple local euro transaction.

Revolut Account

Revolut offers an excellent debit card to use abroad because it allows you to hold over 30 currencies and spend money in over 150 currencies. Revolut members on the free plan get a monthly allowance of £1,000 to exchange without fees (this allowance increases with each paid tier). Then, the platform charges an industry-low Revolut rate to convert your home currency to the local currency of your travel destination. Then, when you use the local currency with your Revolut card, you'll avoid both typical foreign transaction fees and dynamic currency conversions.

More info: Read our Revolut review or visit their website.

Wise Multi-Currency Account

Wise Multi-Currency Account is an exceptional debit card option for international travel. With the app, you'll be able to hold and spend money in over 50 currencies. When converting your home currency to the local currency of your travel destination, Wise charges a minimal fee, often ranging from as low as 0.35% to slightly above 2% for less common currency corridors. By paying with the local currency on your Wise card, you'll be treated as a local cardholder, bypassing both the typical foreign transaction fees and dynamic currency conversions.

More info: Read our Wise review or visit their website.