Currency Conversion and Hidden Fees

Whether you are on holiday, studying abroad or buying online, currency conversion is where small, quiet fees add up. Understanding rates and margins helps you keep more of your money. (Bank transfers abroad are covered in the Banking, Cards and Credit module.)

Watch the 1-minute overview

Watch the full video guide for this module

Reading an exchange rate

• An exchange rate tells you how much of one currency you get for another. Gulf News gives the example: at 1 US dollar = 0.89 euros, 2,000 dollars buys 1,780 euros.
• Going the other way, divide by the same rate: 1,780 euros / 0.89 = 2,000 dollars. Or use the reverse rate: Gulf News uses 1 euro = 1.12 dollars, so 3,000 euros cost 3,000 x 1.12 = 3,360 dollars.
• A useful local fact: The National reports that the UAE officially pegged the dirham at 3.6725 dirhams to 1 US dollar in November 1997, and the article (updated August 2025) reports no change since.
• So 50 dollars is 50 x 3.6725, about AED 183.63, and AED 1,000 is 1,000 / 3.6725, about 272.29 dollars.
• Sense-check the direction: if the foreign currency is 'worth more' than a dirham, you should get fewer units of it than the dirhams you hand over.

Buy rates, sell rates and the spread

• Gulf News defines the mid-market rate as the midpoint between the buy and sell prices of two currencies at any moment. Dealers buy a currency at one price and sell it at a higher one; the gap is their margin.
• Illustrative example: suppose the mid-market rate is 1 pound = AED 4.90. A bureau sells you pounds at AED 5.10 each and buys them back at AED 4.70.
• AED 2,000 gets you about 392 pounds. If you bring 100 pounds home and sell them back, you get AED 470, though they cost you AED 510: AED 40 lost on the round trip.
• Gulf News' method for checking a rate: subtract the offered rate from the mid-market rate, divide by the mid-market rate and multiply by 100. Their example, 0.68 versus 0.65, is a mark-up of about 4.4 percent.
• 'Zero commission' does not mean free: Gulf News and TravelSupermarket both warn that the cost can be built into a poorer rate. Compare the total amount you will receive.

Dynamic currency conversion: always pay in the local currency

• When a card machine or cash machine abroad offers to charge you in your home currency, that is dynamic currency conversion (DCC). The DCC provider, not your bank, sets the exchange rate (Bankrate).
• Bankrate reports an average DCC mark-up across Europe of around 5 percent, and advises: always pay in the local currency.
• Illustrative example: a meal costs 80 euros. If 1 euro = AED 4.00, that is AED 320. With a 5 percent DCC mark-up you pay about AED 336.
• Bankrate warns that a card with no foreign transaction fee does not protect you if you accept DCC, and notes that on cash machines the DCC option is usually on the right, while the button to decline it, on the left, can look like 'go back'.
• TravelSupermarket also advises saying no when a card machine or cash machine offers to charge you in your home currency.

Card and cash machine fees

• TravelSupermarket (UK) reports that many card providers add a foreign transaction fee, often around 3 percent, and some add a fixed fee per transaction.
• On the AED 320 meal, a 3 percent fee adds AED 9.60. Check your own card's terms, as fees vary widely.
• Some cash machines charge a fee per withdrawal, so TravelSupermarket suggests taking out larger amounts less often and checking the fee first.
• Airport exchange desks have a 'captive market' (TravelSupermarket); ordering travel money in advance usually gives better rates.

A simple plan before you travel

• Check the mid-market rate on a reputable finance site the day before, and write down a rough conversion, for example '1 euro is about 4 dirhams'.
• Know your card's foreign fees, and carry one card with low or no fees if your family can arrange it.
• Always choose to pay in the local currency on card machines and cash machines.
• Only change cash you expect to spend, to avoid losing on the buy-back.