UK Debit Card in Eurozone / Website

Hi all,

I recently transferred a (for my standards) large sum of money from an Italian account in Euros to my UK bank account. I know that the conversion is done by the receiving bank, i.e. my UK bank. As expected, they used an awful exchange rate which ended up costing a pretty penny.

I guess I have two questions which are related.

1) Aside from the normal fees charged by the bank for using the card abroad, what if I pay for something in Italy with my UK debit card? Where exactly in the process does the money get exchanged? Is the exchange rate used the true mid-market rate or some imaginary number chosen by my bank to rip me off? I have the feeling that my UK bank would not be the one doing the conversion as it is only sending the money not receiving it....

2) What if I pay for something on the Italian Amazon website with the UK debit card? Or any website in Euros for that matter? I want to buy some stuff there as it is much cheaper, but I don't want to do it if an exchange rate is used similar to the one for my wire transfer I wrote about above. I don't want to use Amazons dynamic currency conversion tool either, because I know that is not a good deal.

Thanks for any help for a stingy newby )

Hi omglolmax,

If you pay for something in Italy using your UK bank issues debit card, then the conversion is done at your UK bank when the transaction is processed. You'll pay the UK bank you are with rate for foreign transactions. The 'live' actually happening on the stock exchange currency rate you won't be paying.

It's the same if you use your debit card on one of Amazon's local country websites. You'll pay the exchange rate your UK bank has set on that day once the transaction occurs on your account.

The difference in rates for purchasing things on holiday or for online shopping means that even if you found a rate that's 'excellent' it'll perhaps make a difference of a few Euro's or Pounds. This is because most purchases like this will be up to perhaps several hundred pounds for the most part, so a difference of one rate to another being say £10-30 or so most people won't bother trying to find the best rate.

When it comes to larger amounts, thousands - hundreds of thousands usually, then it's always best to look for a specific Currency Exchange specialist who get and then offer  better deals than the high street banks.

Disclaimer - Without going into too much intricacy, when you swipe your card in another country (keeping it European for now) then between that swipe and your account, there's perhaps 80 or more financial institutions that could be 'carrying' your data. This all can happen extremely quickly, but the reason you see it on your account a day or two later is down to the processing schedule as well as how quick the data is handled by various servers. The cynical will say it's deliberate as more 'interest' can be charged in the time frame (which to an extent is true!) however when you consider that in 2008, one of the UK's main financial processing data centres when the Consultancy I worked at had a presence, then the servers there were handling around 2 million financial transactions every second, I can only guess this has increased fairly substantially over the last few years. I think the 'slowest' part of the whole entire process is indeed your UK bank, and it taking it's time to 'transfer' the amount onto your account so they scrape that little bit of interest !!

Cheers, DtM! West London & Slough UK!

Hi Dennis the Menace,

Thanks a lot for the very thorough answer!

I wasn't trying to secure the best exchange rate for a transfer. I'm actually trying to buy something worth around 300 Pounds that just costs 100 Pounds less on the Italian Amazon than the UK Amazon. But if the interest rate used is the one my bank pulls out of its behind the day of the transfer it likely will barely be worth it, because that rate is much worse than the actual market rate.

Thanks again for the help!!
Max

Hi Max,

The difference in the exchange rate for this will be relatively small. As an example, if the item is £300 here and is listed in Euro's for the 'equivalent' of £200 when you check 'live exchange rates', then your bank's rate on the day of the transaction would perhaps make the price at £207/210 or so at most. So it'd still be worth it in this regard. You'd have to factor in any increased shipping costs though!

I sometimes bring in items from European countries within the E.U and at levels around £150-1000 or so. I don't even look at the exchange rate differences between my bank, Paypal and the live rates really.

Cheers, DtM! West London & Slough UK!