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USD-GBP exchange rates UK vs USA

My bank charges account-holders nothing to exchange currency, and GBP is cheap at the moment, so I was going to load up before my trip to Scotland May 1. However, I read in Rick Steves's Best of Scotland that I shouldn't bring GBP with me because the exchange rate will be better in the UK than in the USA. Really? I Googled around a little but didn't find any evidence supporting or contesting that idea. I did find the same advice on a Rick Steves Web site: "Resist the urge to buy foreign currency before your trip. Some tourists feel like they just have to have euros or British pounds in their pockets when they step off the airplane, but they pay the price in bad stateside exchange rates. Wait until you arrive to withdraw money. I've yet to see a European airport that didn't have plenty of ATMs." I, on the other hand, have yet to see an ATM that didn't charge some 3% to withdraw cash from my own checking account in foreign currency. Just how much worse is the USD-GBP exchange rate in the USA than in an airport in the UK?

Posted by
915 posts

I think it depends what you are going to do when you arrive. If I don't see an ATM at the airport, I usually just wait until I get to my hotel and then find one nearby. I almost always can use my credit card to buy travel cards for London. However, I've always been able to find ATM's in Heathrow that are connected to banks.

Posted by
597 posts

Right now it is $1.31 to the pound. If you can get that rate without any fees, load up as you say. I think RS generally means many US institutions charge large fees, but it sounds like you have that beat. Most banks have to bring in foreign money in smaller markets and it passes that cost on to the buyer.

Posted by
4822 posts

Don't confuse fee's as the only cost for currency, the exchange rate is also very important.

The conversion rate between currencies is dynamic, it changes minute to minute, and you can find out what the Interbank rate is by doing a simple search for "Pounds to Dollars" and find a rate and websites such as www.xe.com, www.x-rates.com, and bunches of others. For example, at the moment, a Pound Sterling is going for $1.31.

This rate is the Interbank Rate where banks are moving Millions of Dollars and is the best rate available, but not to you. Your bank will say "we charge you nothing" but the rate you get may be $1.39-1.45, that is a mark-up of 5-10% typical of what you will find in the US from a bank. What you need to do is ask your bank how much 1000 Pounds Sterling will cost you in Dollars, then you can do the math to get the cost, trust me it will be more than $1310. For example from Wells Fargo, the rate is $1.3719, or just under 5%, not including any shipping/mail fees.

To compare, if you have a Debit card that charges no fees or percentages for Foreign Transactions, then you can get that same money for about 1% cost, or $1.32-1.33. If you bank with a larger bank and get hit with a $5 out of network fee and 3% Foreign Transaction Fee, then $200 or so in Pounds Sterling will cost you 5.5%, about the same as a good rate getting money ahead from a Bank in the US.

So when people say that an ATM is the best deal, it only applies if you planned ahead and have one of the banks that charge no fees. In your case, from what I gather, you are right, not a big difference in cost whether you get ahead, or get it over there...for you, not for me.

Now there are other things to consider, getting a large sum means you have to carry it with you at some risk. You also are tying up money, and if you get too much, converting back has a cost. As for Pounds Sterling being a bargain, yeah it is, but no more than the average for the last 2 1/2 years, and if I were to look in the crystal ball, the rate probably will not spike up, unless things really change with the Brexit outlook in a really unexpected way, some would trend towards saying the Pound could go lower, nobody really knows.

Posted by
906 posts

Hi, cmarie,

Take in to consideration all of the advice that has been given already. Scottish ATMs charge absolutely nothing to make a cash withdrawal. Your bank in the US will charge a one time fee per withdrawal, whether it's 10 pounds or 500 pounds. That is not a percentage - it is a flat fee. If your home bank is charging a flat fee plus 3% of the amount of the withdrawal, then it's definitely time to find a new bank.

If you have certain types of checking accounts, some US banks will waive foreign ATM fees. If you don't already have a credit card which does not add the standard 3% to foreign transactions for purchases, then it's time to get one. Some of the Capitol One travel rewards cards and the Bank of America Travel Rewards card are examples of same. Most have no annual membership fee, and the rewards features are excellent.

Avoid like the plague any ATMs at Scottish airports that have Travelex listed anywhere on the machine. You'll be throwing good money away. Look for ATMs, either at the airport or once you get in to town, that are owned by Bank of Scotland, Royal Bank of Scotland, Clydesdale Bank, Lloyd's, or Santander. Your credit card can be used for airport shuttles or taxis, until you get to an ATM.

As has already been noted, buying pounds sterling in the US to take with you is going to cost you more, maybe much more, than withdrawing money from an ATM once you get there.

If, however, you are making a cash withdrawal in a bank, or at an ATM, using your credit card (cash advance) instead of your debit/ATM card, then all bets are off. You'll be charged a bank fee from your home bank, usually a percentage of the withdrawal; interest from the day of the transaction until you pay your credit card bill in full; and most likely the bank in Scotland will tack on a fee as well. So if you're that desperate, it would be better to wire back to the US for someone to send you money!

Best wishes!

Slainte!

Mike (Auchterless)

Posted by
3 posts

Thanks, all! I'll ask at my bank (Chase) what £100 will cost me in USD. If it is indeed more than $131, then I'll use my no-foreign-transaction-fee credit card to get cash from a Scottish ATM. My Chase debit card definitely charges me a fee for getting cash in a foreign country. I wasn't aware there were debit cards without such fees.

Posted by
8631 posts

Never use a credit card at an ATM. Your credit card has no foreign transaction fees on PURCHASES but at an ATM it will charge you interest on the amount. It may also charge you fees.

I have a Schwab checking account and debit card. If an ATM anywhere charges fees, Schwab refunds it. They charge no fees.

Posted by
2963 posts

I second the suggestion for the Charles Schwab Debit Card and the reminder not to get cash with a credit card.

Credit cards treat such withdrawals as cash advances and charge interest from the day of withdrawal.

Posted by
4822 posts

Regarding using a credit card for a cash advance, it is an option, again, understand the costs. Many people who warn against do not know the cost, just "things they heard".

Ask your credit card company what the fees, costs, and rules are for a cash advance, also, make sure you have a PIN set up.

As an example, on my cards, there is a $10 fee for the transaction, or 5% of the transaction, whatever is more, so $200 worth of currency comes at a 5% fee, from what I can see, about the same as getting cash ahead or using an ATM card that charges fees. Interest was mentioned, Interest does start from the time you get the cash (as opposed to a 30 day grace period) and it is at ~24%, sounds high, but on $200, the interest after a month will be about $4. You can go online however and pay off that amount on your card and not incur interest (well a minimum of a few cents). Just be aware that any payment made first pays off purchases, then cash advance, so best to use a credit card with a zero balance (If you carry a high balance on credit cards, then arguing about a few dollars interest or an ATM fee is a bit counterproductive) So in the end, if you do not have the option to get cash at the 1% of a good ATM card, then cash advance, properly managed is not any worse than other options.

Posted by
6181 posts

Buying foreign currency ahead of time requires a human handling the transaction, plus the cost for mailing or other transport fees. Using an ATM does not, it's a point-of-sale electronic transaction with no human intervention. It's that simple. Also, you don't know what the "cheap at the moment" GBD exchange rate will be in the future, it sounds like you're gambling that the current rate can't get lower. But there is no evidence either way, it's nothing more than a hunch or a hedge.

I don't think there is a bank anywhere - not even a credit union - that charges account holders "nothing" to exchange currency - it just hides the cost in the exchange rate. Markups of 7% or more are not uncommon. If you don't have a debit card that doesn't charge you through the roof, then get a credit union account. As not-for-profits, they are not in it for the money (mine charges 1% of every withdrawal no matter where in the world).

Posted by
4690 posts

----- then I'll use my no-foreign-transaction-fee credit card to get cash from a Scottish ATM. My Chase debit card definitely charges

cmarie, people are sometimes careless in using what are precise and important terms. A credit card can only get "cash advances" at an ATM terminal in ANY country. A cash advance on a credit card normally carries a fixed fee, and begins to accrue INTEREST immediately, regardless of whether you pay the first bill for it in full or not. (An interest bill often affects your NEXT month's bill as well, but credit card terms vary. You are setting yourself up to be a victim of the bank's greed, and ability to take advantage of naive or uninformed customers.

This is a basic fact of American credit card life, and you need to have these rules in mind. It is likely, but not certain, that a 3% Foreign Transaction fee (like I would get for a Bank of America WITHDRAWAL from my own account money) might be less than one month's interest. I'm not urging you to post more information than makes you comfortable. But you could use the Search box to read more here about this topic. It comes up at least monthly.

You didn't even raise the issue, but at some banks, there can be a difference between an ATM Card and a Debit Card. Bank of America has told me that only Debit Cards can be used in FOREIGN ATMs. ATM Cards can only be used in domestic ATMs (they said to me.)

Posted by
5029 posts

Agnes speaks with wisdom. There are costs to the bank, and they have to make money on these transactions somehow. The people you talk to at the bank don't always understand the question or their own bank policies, especially if these are rare relatively transactions like they are where I live. I've gotten currency in a pinch at two different local banks the last couple of years. One bank insists that there is no fee, just a $15/transaction "service charge". Oh, and their "market rate" is nowhere close to the interbank rate, buying or selling. The other bank also says they have no fee, but adds a % "service charge", and it turns out, they order their currency from the previously mentioned bank.

Posted by
11154 posts

"The people you talk to at the bank don't always understand the question or their own bank policies, especially if these are rare relatively transactions like they are where I live."

This point is quite important. Over the years, I've read lots of accounts on this Forum, of people who were given all kinds of misinformation by the people working at their bank, as well as the customer service reps on the phone. If you don't speak to someone who actually deals with foreign transactions, the person often simply doesn't know what's what with their bank, card, etc. Be sure to look at the actual policies and fees yourself, rather than taking anyone's word for it.

Posted by
485 posts

Thanks, all! I'll ask at my bank (Chase) what £100 will cost me in USD. If it is indeed more than $131, then I'll use my no-foreign-transaction-fee credit card to get cash from a Scottish ATM. My Chase debit card definitely charges me a fee for getting cash in a foreign country. I wasn't aware there were debit cards without such fees.

If you use your credit card to get cash, domestically or foreign, expect to pay interest on that amount. What you are doing is getting a cash advance, not taking funds out of a checking account.

Posted by
3 posts

You all were so right! There are indeed no "fees" for a Chase customer to purchase GBP in person at a Chase branch, but what you pay when you purchase GBP with USD in person at the branch just happens to be exactly the same as the going exchange rate plus the same $5 plus 3% that I would be paying if I were withdrawing GBP from an ATM in Scotland using my Chase debit card. They call it an "exchange rate," and confess that it doesn't match what you will see online--because the fees are built into the "exchange rate." Phooey on that! I just opened a Capital One 360 online checking account and loaded it up with $1000 that I can withdraw fee-free from any Allpoint ATM in Scotland (of which there are many in Inverness, Glasgow, and Edinburgh, main points along my journey). Since my Chase Freedom Visa also charges a foreign transaction fee, I might just sever ties with Chase entirely as I approach an era in my life when I will be spending more and more time away from the USA.
https://www.xe.com/currencycharts/?from=GBP&to=USD

Posted by
906 posts

Hi again, cmariepeterson,

You've seen the light! I probably mentioned this in a previous post, but I've found the Bank of America Travel Rewards card to be very useful for foreign travel. Not only is there no annual membership fee, but they don't charge the 3% foreign transaction fee (which also comes in handy when ordering from Amazon.co.uk), and I use it for car insurance coverage when I'm in Scotland. Plus I get 1 1/2 points for every dollar spent, toward future travel charges.

Hey, I just realized you're leaving next Wednesday! Have a wonderful time!

Slainte!

Mike (Auchterless)

Posted by
123 posts

We travel all over world and always work out a deal with our bank and credit card companies prior to leaving USA. One time, one of our credit card companies Chase waived all fees when we returned to USA which is where that credit card originated. We have an international military credit union for debit cards that doesn’t charge for international exchanges. Using that debit card was best deal. I always notify that bank that I will be withdrawing local currency (except in Iceland) on a daily basis. I agree with bank on cash amount for daily withdrawls (usually only $50-$100 a day).
Increasingly in Scotland, like other countries, cash is so last century; therefore I just use the military debit card.

Posted by
3315 posts

And you don't have to use Allpoint ATMs to get no fee cash in Europe or the UK with your Capital One card.

There are two type of fees you can pay at an ATM. The first is the one your bank charges you for not using their ATMs. This is the common $5 + 3% the large banks charge. Capital One 360 does not charge any fees on their end, ever. The other fee is what the ATM operator charges when you use their machine. By using an Allpoint network ATM, Capital One guarantees you will not pay a use fee to the ATM operator. Fortunately, most ATM operators in the UK and Europe don't charge that type of fee anyway. So don't worry too much if you don't find the Allpoint ATMs to be plentiful (I never have) on your European trips and just use any ATM. If it says it wants to charge you fees, just cancel and move to a different one.

Posted by
11154 posts

Following up on Mark's post: It used to be true that European bank ATM's didn't charge their own fees. But, more and more, they are starting to. This has become a issue in Spain, and I saw it at least once in the UK. If you see a fee from the ATM, you can cancel the transaction and look for another one from a different bank - but do be alert for these fees, which just a few years ago were not present at bank ATM's at all.

This is aside from dynamic currency conversion, where the ATM asks you if want you to "lock in" a rate in US dollars instead of GBP. Always say NO to this.