Got a prepaid Mastercard? You won't be offered rip-off currency conversions from this week
We've long warned travellers to pay in the local currency rather than pounds to avoid hideous exchange rates – and from Friday, if you've a Mastercard prepaid card you won't be offered transactions in pounds at all.
'Dynamic currency conversion', where you're given the choice between paying in pounds or in the local currency when using ATMs or card machines abroad, is marketed as a way for travellers to know what they're paying in their home currency – but it can lead to people paying extra unnecessarily.
This is because if you choose to pay in pounds, the currency conversion will be done by the retailer's bank, and you're likely to get a poor rate.
But if you pay in local currency, your card will do the conversion, and if you've got a top overseas travel card you're guaranteed near-perfect exchange rate. It's why Martin always says to pay in euros rather than pounds.
From Friday 12 April, travellers with prepaid multicurrency cards using the Mastercard network, such as WeSwap, FairFX and Caxton, will no longer be offered the choice of paying in pounds. Instead, their transactions will automatically be processed in the local currency, which should mean they get a better deal.
Travellers spending on Mastercard credit and debit cards will be offered the choice between pounds and the local currency as usual.
What are the new rules?
From 12 April, businesses and retailers will no longer be allowed to offer customers paying with prepaid multicurrency cards on the Mastercard network the choice between paying in pounds and the local currency.
Mastercard says it's made the new rule because customers who opt to pay with a prepaid travel card have already effectively chosen to convert their pounds to the local currency. This means it doesn't make sense for these customers to be given the choice to convert the transaction back into pounds.
When these customers make a transaction at an ATM or using a card machine in a shop, they simply won't be given the choice of which currency to use.
Instead, their transaction will automatically be processed in the local currency, using their card's conversion rate rather than the conversion rate of the retailer's bank.
The new rules apply across all countries, so transactions using a prepaid Mastercard will be processed in the local currency regardless of where you are.
We've asked Visa and American Express if they have plans to introduce similar rules for their prepaid cards, and will update this story when we hear back.
What does Mastercard say?
A Mastercard spokesperson said: "We've recently made changes to our prepaid programmes.
"Dynamic currency conversion will no longer be offered for prepaid multicurrency Mastercard cards, as these cardholders have predetermined the currency they wish to pay in, before they travel and any purchases are made.
"Businesses and retailers will still be able to offer credit and debit cardholders the choice to pay in pounds or the local currency."