This is a quick post to make you aware of the benefits of paying in the local currency
of your chosen holiday destination abroad using a specialist bank card that offers
such a service without any extra fees or charges.
Currently, there are at least two online banks in the UK that offer this service –
Monzo and Chase.
Both of these bank accounts are free to have and use unless you want to subscribe
for their premium accounts which are not discussed here. What they offer is a debit
card which can be used to pay in a different currency, truly without any fees and
charges, and at an exchange rate following very closely the one published by the
World Bank at the time of payment.
So what does that mean in real terms? Let’s say that you are in Spain and you are
about to pay a restaurant bill of 100 euro. You can pay that with euro that you
exchanged for pounds sterling, or you can pay using your bank card. If you use a
normal bank card to pay the bill, you will be “hit” twice by charges and fees. Firstly,
you will have a very unfavourable exchange rate as banks normally take a
commission every time they have to exchange currency in this way. Even if they say
they do not, they will use a rate that is good for them and not good for you. Secondly,
most banks have very strict rules about paying in foreign currency, and will probably
charge you a percentage of the transaction as a fee. And thirdly, some banks might
have a monthly charge applicable if your bank card had been used to pay in
currency, and this fee could be substantial. All this makes using normal bank cards
to pay abroad a very bad idea.
On the other hand, if you use Monzo or Chase, you will have none of these fees,
charges, and commissions. The whole point of these cards when they first started
was that you can pay in currency on very favourable terms. So you can be sure that
exchange rate used would be as close to the World Bank as possible, there won’t be
any percentage fee for paying in foreign currency, and there won’t be any fee at the
end of the month for using your card abroad.
In some instances, travellers have reported that the exchange rate had been even
better than that of the World Bank. This could have been due to delays in Monzo
updating their rates to match those of the World Bank. One traveller reported that,
while in Spain, they used their Monzo card to buy a mobile phone online and have it
delivered to their villa. They paid in euro, and what left their bank was £545. They
then checked the current exchange rate by going to Google and searching for “599
euro to GBP” and the result at the time was £550 euro. The exchange rate used by
Monzo at the time was so favourable to the traveller, that it saved them £5 – which
never ever happens if you exchange currency at a change bureau or pay using
traditional bank cards. Unfortunately, it seems that in recent years Monzo have fixed
this glitch, and now you get a disclaimer under every transaction telling you an
approximate value in GBP and advising that the final value will be determined later.
This is presumably to allow for the exchange rate to update and settle. In any case,
the exchange rate is still outstanding.
Just a disclaimer – Monzo is not great for withdrawing cash out of an ATM abroad.
You get a relatively small fee-free amount, after which fees and charges would
apply. It is, therefore advised, to use your Monzo card to make card and online
payments instead of taking cash out of cash machines.
Another important note – a lot of card machines and transactions ask you if you want
to pay in GBP or in the local currency when you use your card. Always choose the
local currency. Otherwise, the card machine / website would use the merchant’s
exchange rate, which is always very unfavourable for you and benefits them. If you
choose to do that, Monzo and Chase won’t be any help at all and you will pay more.
Finally, it is worth mentioning that Monzo and Chase could be useful while you are
planning and booking your holiday abroad. If you are paying for hotels, flights, or
attractions or making restaurant deposits online, and there is an option to pay in the
local currency, you can use Monzo or Chase and save a few quid.