Exchange Rate

You need to understand the system. And part of that system is making a profit. Nothing is free. Just a question of now much you pay. Also, think of money as a commodity just like pork bellies or oil. The number you see, 1.6, is commonly called the interbank rate, could be called the wholesale rate but it is the absolutely min rate and, it is true, only available to very large currency exchanges. AND fortunately it is very close to the rate that credit cards and debit cards start at. After that, everyone - banks, credit.debit card issuers, etc. - add their margin, profit, etc. and you get the retail rate. And your bank is selling those pounds to you at about a 10%, A little high but not excessive. Shopping around you might find mark ups as low as 5%. But hard to get below that in the US. Generally using a debit card at an ATM is the most convenient and cheapest way to obtain currency. Some debit cards may charge upwards to 3% which is not a bad deal. Some charge nothing so you get your currency at nearly the interbank rate the is always a small network (Plus,Cirrus) fee of less than 1% buried in that rate. But that is the best you are going to do. Get a 100 pounds from your bank to get pocket change and after that use the ATMs.

I withdrew pounds at an ATM in the UK last Monday at a rate of 1.64 (just checked my bank statement). My credit union added an FTF of 0.8%.

The exchange rate is the actual interbank rate. The rate you get depends on where you exchange and what their policies/fees are. ATM withdrawls almost always offer the best deal because the rate is the interbank rate plus whatever out of network fees your bank charges and usually a 1% foreign transaction fee to cover their costs. Buying money from a bank is the next best as they typically charge close to the actual rate or have small fees. But it costs them money to give you that service and they'd like to cover that cost and make a small profit. Exchange agencies are the worst because their business is to make money trading your money. Whether they do that with high fees on a great rate or no fees on a terrible rate varies. But the house always wins.

I agree that the best rate is from an ATM. In addition to my Capital One credit cards (no foreign transaction fee, no annual fee, 1% cash back) I have a Capital One online checking account I use only for travel. That also has no foreign transaction fees, and also no ATM fees. It's linked to my Vanguard money market account so I can move money in or out over the net. I do usually take a few 50 and 100 USD bills with me for emergencies. It always surprises me that it's so hard for my bank to come up with crisp new bills (no point in taking anything else to Asia).

Thanks so much for your replies (and explanation of how the system works). Kind regards....

Also most places in London will take credit cards and there are more and more cards now that will not charge foreign transactions fees (often 3%). Besides the Capital One card, the new Hyatt card, British Air credit card, Chase Sapphire Preferred, etc. As others have stated, the ATM route is the easiest way to get currency.

To clarify Richard's answer, you should not use a credit card in an ATM unless you want to incur immediate interest on a "cash advance". Ony use a debit card at an ATM.