British Pound

You were charged a "fee" of sorts, you will almost always pay to change money. When money changers say "no fee" it just means they won't charge a transaction fee, there will be a profit margin buried in the exchange rate (this includes Marks and Spencer.)

A good way to understand is not to think about changing money but "buying pounds" - which is what you are really doing. Use the same criteria to decide where to buy pounds as you would any other large purchase. The rate you see online or in the papers is called the mid-market interbank rate, this is the average of the "buy" and "sell" rate that the banks use to sell each other money millions at a time. Think of this as the "wholesale" price, as a retail customer you won't get this rate so the name of the game is to get as close as possible.

The consensus is that using an ATM card (usually) gets you the best rate and has the bonus of being pretty convenient. Your strategy (take a small amount if cash, then use ATMs) is popular here and the one I use myself (although I often don't bother getting money before I go, just using an ATM on arrival.)

Some caveats before you go. ATMs are usually the cheapest way but the actual cost is determined by your home bank and all banks charge at different rates. Check with your bank what they charge and see if you are prepared to pay that amount (you already have a price to compare as you have already changed money.)

Also make sure your card will work abroad (ask your bank) and notify them you will be travelling (banks will block your card if they see "suspicious activity", apparently many American banks see foreign travel as suspicious.)

Welcome to the magical world of money exchange.

Your bank set it's own exchange rate to change money. I'm finding my bank has started to do the same.

The best way to get money in Europe is through the ATM.

And just because Marks & Sparks charges no fee, what rate do they use? They're making money somehow.

Yes you were charged a "fee". The bank makes money off of transactions by buying currency at a lower price than it sells currency for. In your case you paid $173 for $167 worth of Euros, or about a six dollar fee.

It's really a misnomer when you hear that a bank or exchange charges no fee, their profit is in the exchange rates they buy and sell at. If you sell any left over Euros back to the bank, their buy rate is likely to be 1.62 or 1.63 - so you lose more money exchanging back.

If you had used an ATM, the rate should have been approximately the true exchange rate but you pay a fee to use the ATM (nothing from the bank in England and probably $3 by your bank).

It works out cheapest using ATM's and making fewer, larger transactions to keep the fees at a minimum.

Thanks. That's what we'll do - use the ATMs once we are in London. I already have 100 pounds to get us going!

I buy money from my credit union at the daily exchange rate. They charge the mid-market rate. I take a lot of cash with me, which some might object to, but it is the way I travel. Cash talks. If I need more, I use the ATM. They have the best rate when you need more in country. BE SURE to call your bank and tell them you are going. Call the local branch and the number on the back of your atm card. A week before you go, call them again. Do the same with any credit card you are taking.

I do the same thing, John.
I take cash primarily and never had an issue with losing it (I keep it in my bra).

It may cost more in the long run to buy it from the bank here, but it helps me to save up because every paycheck I would convert dollars to pounds so by the time my trips comes around, I have a nice stash.

Otherwise it would be hard for me to save it up in my account. I am a hopeless shopaholic. But once it is converted, I cant spend it at home!

Do they have places like drugstores, where you can buy something and get cash back? We have CVS, Rite-AID and supermarkets that do it here. That way you can buy some candy or something and get cash back and not have to pay the ATM fees

Leila,
You won't be able to get cash back with purchases in Europe. When you use your debit card the transaction will be treated as a credit card transaction. You're not given the choice of "credit" or "debit-cash back" like in the US.

You can certainly get cash-back using a local debit card in the UK. The transaction is not run in any different way the cash just shows up as another item on the receipt.

I've no idea if it works with a US debit card although I don't see why not.

When you use a debit card in the US you are given the choice of doing the transaction in credit or debit mode. You can only get cash back if you choose "debit" and enter your pin. Whenever I've used my debit card overseas for POS transactions it has always gone though as a credit transaction (I've had to sign for the purchase), and never given the choice doing it as a debit transaction and getting cash back. Probably has to do with the chip issue.

Oh, that wouldv'e been way too easy. Oh well. I might just use it like a credit card most places. Fortunately I belong to a credit union. They don't charge any differantly overseas. I would just have to make sure I take out more than the equivalent of $60 and I only have to pay the ATM fee. No extra 1% or anything else. I am so thankful!

Our cash-back system works differently. After the cashier has finished totalling your items but before you pay you ask for cash back (some stores will ask if they see you have a debit card in your hand,) the cash is then added to your total and you authorise the whole transaction in the usual manner.

This system pre-dates 'chip and pin' which we've only been using for a few years. We always signed for debit card transactions same as credit cards, 'chip and pin' replaced signing for both but it doesn't use the ATM network. We don't have the concept of choosing to run cards as credit or debit, it's either a credit card or a debit card.

Okay, so Peter. If my debit card has the Visa symbol do I still have the option of asking for cash back after the total is given? Or does it have to be a straight debit card only?

As I said I haven't the foggiest idea how it will work with an American card - just how it works locally.

I have a UK issued VISA debit card (with a VISA debit symbol) and it works as I described. I'm not entirely sure what you mean by "straight debit" versus one with a symbol so I can't really help there.

Peter's post has intrigued me....perhaps the reason I was not able to get cash back was because I never asked:)
I'm going to be in London at the end of October for the film festival so I'll give it a try and see what happens. It's certainly advantageous to do it this way, as cash back doesn't incur any fees from my bank. Unlike ATM withdrawals.

Exactly Michael. I am going to take some cash from ATM, but see if I can do it at stores as well. I also won't get charged either way if I do it that way. Here is hoping we both can get away with it :) I will let you know when I get back.

By "straight" Debit card, meaning an ATM card that can only be used as a debit card not as a credit card. Mine can be used as both. Most stores here accept both, but not all accept just debit cards.

Marks & Spencers does not charge a fee, but, as a previous poster pointed out, they buy at one rate and sell at another, thus making a profit. Where they have an advantage, and I think Thomas Cook in the UK does this too - if you have currency (notes only) left over, they will buy it back at the same rate they sold it to you. Now this does not cover ALL currencies, but most of the main ones, including US$

Believe it or not the bank in the basement of Harrods has a very good rate . I was told the very rich will pay what ever up stairs but not a penny too much downstairs !!

Hmmm. Maybe the BBC could do a dramatic series called "Upstairs Downstairs".

I was in England recently. The travel sections of the newspapers were pointing out places for Brits to visit outside the "eurozone." The British Pound has taken a beating vs the Euro. So the Brits are dealing with currency fluctuations, too. The Pound is fairly cheap for those with US Dollars. A year or so ago I paid over $2 per Pound. Earlier this year the pound was around $1.45, so I bought up some for when I returned. That turned out well for me. I ordinarily wouldn't bet on which way rates will go.

Cindy,

As Frank II mentioned "Welcome to the magical world of money exchange". The currency exchange rates are continuously changing, so it's certainly possible that it changed that much between the time you purchased the currency and the time you got home.

One thing to keep in mind with currency exchange is that the Bank ALWAYS makes money, whether they advertise "No Fee" or not. That applies regardless of whether you're changing from US$ to Pounds or vice versa. That's one reason I don't bother changing Euro's or Pounds back to local currency when I get home. I just save it for the next trip.

ATM's usually provide the most favourable exchange rate. Note that your travel funds usually must be in a chequing account with a four number PIN. It's always a good idea to pack along at least one extra ATM card, in case there are any "problems" with your primary card.

Happy travels!

I have been asked several times here in the states if I wanted any cash back when I used my debit card.

We just returned from our London trip! Had a great time and used the ATM without any problems.