AIBU to not understand exchange rates?

[allegretto]

I don't know why but I cannot get my head around them! I have a euro bank account but I buy things from the UK. I know the exchange rate is in my favour at the moment. If I buy something from a UK website and it asks me if I want to pay in euros or pounds - what is better for me?? Sorry for AIBU post but thought more people would see it here. (And I don't want to get sidetracked into a brexit debate - just want to understand something which should be really simple - thanks!)

Thanks, really helpful.

Nice maxington. Feel big & clever now do you?

The £ is doing badly right now.,

You always lose when you exchange money. You should ideally shop in the currency that you already have.

Do YOU know whether you are charged the exchange rate at time of purchase or whether you are charged a fixed exchange rate or one dated later on - because that would make all the difference?

Have a look at mse website. It says pay in the local currency as you get better rates

When I've bought in another currency I've been charged the exchange rate at the time of the transaction.

Your not thick - no questions are stupid if you don't know the answer, regardless of others intelligence.

If they ask 'Do you want to pay in pounds or euros?' – say EUROS. When paying on a card abroad, you're often asked if you want the transaction to be in pounds or the local currency. As a general rule, never pay in pounds – that means the overseas store/bank is doing the conversion, and rates are awful.
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You are charged at the rate when the transaction hits your account. Or at least mine does.

Go to xe.com and put it through there to get it clear in your mind.

Bank exchange rates may be slightly different from stated and they vary between establishments.

Well I have to pay from a euro bank account but I am not sure what they mean by charging me in pounds or euros. Surely either way it has to be converted from the original price? Is that one way the seller does it immediately, if not your bank does it when the transaction goes through?

Not a stupid question and the answer is it depends. All things equal it shouldn't make any difference but it is very rare to get the actual exchange rate.

At some point the money will have to be converted (unless retailer has an € bank account) and that will incur a charge, depends on what the charge is and who is incurring it.

Thanks all - I understand my confusion a bit better now!

Mainly you are advised to pay in the local currency, as the exchange rate you will be given by your bank will be more favourable than the random business gives you.
So in your case, pay in £.

When we go to e.g. Canary Islands (from home in UK), we always pay in Euros in restaurants.

The short answer is that knowing that the euro is weak against the pound doesn't tell you the answer to this question, as you don't know when a shop priced its item. However, in general when one currency gets stronger against the other it is better to buy in the weaker currency.

Basically imagine the item was priced one month ago at £10 and (e)15 at a time when these values were equal, i.e. so £10 costs (e)15. Clearly in this scenario it doesn't matter which currency you buy in - the value is the same in both.

Imagine that over the last month the euro has got stronger against the pound, Now, (e)15 buys £11. However, the shop has not updated their prices to reflect this change. So the item is still £10 or (e)15.

Disregarding the cost of exchanging money, it is now better for you to use your euros to buy the item. If you bought it in euros you would still be spending (e)15. But if you bought it in pounds you would be spending about (e)13.64.

However, in the case of any given website, you don't know when they priced the item (or what other factors went into pricing). So you can't tell just from knowing that the euro is currently strong against the pound that it is better to buy in euros. You have to convert the price in pounds into euros.

You also have to work out who is converting the money for you (your bank or the website) and whether they will charge a commission/fee. For low value items, a fee to pay in pounds probably means its best to buy in euros.

In addition... The critical bit is the exchange rate that the website uses.

For example, those machines that offer the choice of local currency or sterling use a really bad exchange rate, so while you can see what you are spending in pounds, it will be more than if you paid in local and let your bank do the conversion.

And 'no fee' just means a worse exchange rate. Never get owt for nowt!

Actually the advice is to ask for it to be paid for in the currency of your card account. I often buy things on amazon.com to send to relatives in the Uk. You can see what Amazon would charge in pounds if selecting £ but when it comes through on my card (having selected dollars) it costs less.

This is because the credit card company gets a far better rate as it will put all its transactions through and thus get a better rate than your single one.