Credit card users warned

Holidaymakers were warned this week, to beware unscrupulous traders who use a local currency conversion system (at a very unattractive rate) when shoppers buy goods abroad using their credit card.

A system called "dynamic currency conversion" allows a shop to give foreign credit card payers a choice of paying in a local currency rate or using the exchange rate set by the card issuer.

The local rate is nearly always poor value - and earns the shopkeeper a commission. Worse still, some retailers do not tell shoppers that they have a choice, and instead automatically process each payment using a local currency rate.

One cardholder who got caught out in Spain recently, only realised she had paid in the local currency rate when a warning appeared at the bottom of a receipt.

"It said I had foregone the right to use my bank's exchange rate. I had been buying a present for my grandson and had been having a genuinely pleasant conversation with the shopkeeper. When I questioned the receipt, they suddenly turned nasty," said Angela Drake of Northwood, London.

MasterCard and Visa said they are aware that some shopkeepers are not letting card payers know that they have the option of paying at the bank exchange rate.

Paul Lucraft, UK general manager at MasterCard, said that in some countries where the currency is more volatile, paying in the local currency could save money. However, he added that most shoppers liked the reassurance of paying their bank's rate.

"What retailers need to do is make it clear to the customer that they can choose to pay the local currency rate or the sterling exchange rate of their bank," he said.

Mr Lucraft added that MasterCard has an international code of conduct and that any retailer found to have broken it will have their agreement with MasterCard terminated.