Banking & Money

29 September 2010

England, Scotland and Wales use the pound-sterling. Although they are members of the
European Union they do not trade in the Euro. Scotland has a Scottish pound but is it interchangeable with the British pound. Either can be used in England. Northern Ireland is controlled by the British and trades in pound sterling. The Republic of Ireland is a member of the EU and trade in Euros.

The use of sterling dates back to the 700’s and as I would love to tell you about it the
Telegraph did a nice story that saves me a lot of typing.

ATM Cash-Points, Cash & Credit

England uses pound-sterling (£). Most of Europe and the Republic of Ireland (Dublin) use the Euro (€). You do not need to have pounds with you before you go, as ATM’s (Cash Points) are everywhere. This is the easiest way to get your money at the best rate but you may be assessed a small fee by your bank. The machines in the UK return your card first before they give cash. I think this is a safety measure. Most US banks charge a 1% to 3% foreign currency conversion fee when you use your debit or credit card over seas. Please read more about this matter from USA Today. More and more ATM cash points are dispensing currency in Euro’s as well as sterling.

Mastercard ATM locator site and Visa ATM locator site should help you locate a point anywhere in the world, should you travel like 007.

If you buy cash from a bank or other provider in the states you could pay a high fee and postage. If you cannot buy cash in your home city the bank will send it to you and it may be at your expense. Check with you institution for all charges. The American Automobile Association (
AAA) sells currency, traveler’s checks and products.

To prevent identity theft many merchants are using hand held card readers that allow you to sign on the spot and your card is never out of sight. Cards issued in the UK have a microchip that the card reads. I am not sure how that works but US card may not have them. I was sometimes asked to show a photo ID when I used my chip-less card. Credit cards offer a good exchange rate and will show the conversion on your statement. At one time my card company displayed the exchange to 32 decimal points. Why?

American Express
Overseas Card
Discover Card
Master Card
Visa Card

Banks in England

Banks are great when you need to withdraw money from a cash dispenser but no so great on other services. If you are not a customer you may not get currency exchanged and may pay a high fee for cash advance on your US issued credit card. Yes, I would know.

Building Societies

In short, a building society was an institution where one went to get money for a home loan. Today they are much the same as banks. Regulations and services may be different. They do want your account and will be eager to talk to you. As a tourist this may not be for you.

Credit & Debit Card Transaction Fees
CARD Act of 2009

The U.S. Congress passed the Credit Card Accountability Responsibility and Disclosure Act (CARD) Act in 2009 that tightened the rules that financial institutions must abide by so consumers are better protected from predatory institutions. But as in most U.S. laws there were “loopholes”. Financial institutions get to identify what a foreign transaction is when you use a credit or debit card. When you use a card outside the United States, you can pay up to 3% of the transaction to your institution as well as the institution giving you money via an ATM or cash advance. This would apply if your institution had a branch where you are obtaining your own money. Your institution needs this fee because the computer performs this conversion in one-billionth of a second.

In addition to paying a fee for your institution converting the exchange, there are other ways they can extract this fee. If you make a purchase from your home and the charge is in U.S. dollars, you can be hit with fee if the transaction goes thru a foreign bank. It is still considered a foreign transaction. Retailers overseas are offering to write your bill for goods or services in U.S. dollars and not in the local currency. This is called dynamic currency conversion. That may sound like a nice gesture on their part but it is a moneymaker for them. That means you are losing money on the deal. When a merchant charges you in dollars, they receive a fee from the bank or credit card company they are using. This fee along with the transaction fee shows up on your statement when you get back.

Credit Card Embedded Chip
So far I have had little problems using my cards overseas, but that could change for me soon. U.S. institutions are reluctant to change their cards from magnetic swipe to microchip embedded and that could be a problem for U.S. travelers overseas. The processing equipment being used looks for information in the cards. When I used my card without a chip I was asked to show photo identification. This was not a big deal with me but what would have happened had I not have photo ID? I witnessed a woman ask another woman if she would buy her a pack a cigarettes from a vending machine in Germany. The machine, which did not accept cash, reads the chip, which verifies the persons age. Using a swipe card would not have worked. Changes are coming, for better or worse and U.S. institutions are not helping us by lagging behind advanced technology. They are also not helping travelers with abhorrent fees.

Currency Exchange

Do your homework as this can save you money. Bureau de Change locations post the exchange rate for currency that they buy and sell. In either case they make money. GoLondon has good information of this here.

Currency Exchange Universal Currency Converter
Currency Exchange in chart form
Currency Exchange
Travelex in London
Travelex World Wide

Currency Exchange – Buying & Selling

The rate of exchange can be found using one of the exchange sites above or other sources. The rate changes every day but not too much in the short term. This is almost never the price you pay or what you get when you sell. In any transaction the merchant needs to make a profit. All exchange bureaus post the buying and selling price of currency and they reflect their profit.

Dollars and Cents

American has 100 cents to a dollar and England has 100 pence to a pound. The two countries express this the same way: $1.50 and £1.50. Should you be travelling to the European mainland the way numbers are written is different. Europeans typically use a comma as a separator as such: €1,50.

Traveler Checks

These were great before credit cards but I never used them any more. You may have to pay a fee to buy them and if they are shipped to you there is a shipping fee. Some (smaller) merchants will not accept them unless they are in British Pounds or Euros. Vendors such as AAA or American Express
issue traveler checks in Sterling. If you use Traveler’s checks, try and get them in British Pounds.

VAT (Value Added Tax)

This is a 17.5% tax on goods and services on most everything. If you buy a lot of goods you can get your VAT back if you take them out of the country. If you have it shipped out you will not pay the tax but you will pay the customs duty when it arrives at you door. The duty is lower than the tax but unavoidable. The tax will increase to 20% on 4 January 2011.

One does not pay a VAT on books, newspapers, magazines, children’s cloths and special equipment for disabled people. There is also a reduced rate on some other day-to-day necessities. See

VAT (Value Added Tax) Getting it Back

You can get some of your VAT back and this UK Government site explains how to go about it. You will need to shop at a place that is a part of the VAT Retail Export Scheme. The shop may have a sticker in the window, if not ask. There is a small amount of paperwork and you will need to present your passport.

World Currencies

EUR – European Euro*
CHF – Swiss Franc
AUD – Australian Dollar
CAD – Canada Dollar
CNY – China Yuan Renminbi
DKK – Demark Kroner
GBP – Great British Pound
HKD – Hong Kong Dollar
HUF – Hungary Forint
INR – India Rupee
JPY – Japan Yen
MXN – Mexico Peso
MYR – Malaysia Ringgit
NOK – Norway Kroner
NZD – New Zealand Dollar
PLN – Poland Zloty
RUB – Russia Rubles
SEK – Singapore Dollar
THB – Thailand Baht
USA – United States Dollar
ZAR – South Africa Rand

*See this
map for a showing of countries in the EU. Not all EU countries trade in the euro.