When you travel to Britain, you usually must pay for your purchases in British pounds sterling. If you live or work in the United States, this means you will need to convert your U.S. dollars into pounds. The amount of British money you receive in exchange for your dollars depends on both the exchange rate and the fees charged for the exchange.
The exchange rate between the dollar and pound varies depending on several factors, including both countries' interest rates, inflation rates, government debt and relative economic strength. The worst year for Americans to travel to Britain was 1864, in which a single British pound was worth $9.97. The best year was 1985, when you could buy a pound for $1.30. In the 21st century, the price of a pound has ranged from $1.50 to $2.
Cash in Advance
Before you leave for Britain, buy enough pounds to handle arrival day expenses, such as transport to your hotel, tips and your first few meals. Large U.S. bank chains, travel agencies such as American Express and some online foreign exchange companies sell pounds to you either in person or by mail while you are still in the United States. Major international airports in the United States also have currency exchange machines or kiosks. Because the exchange rates are usually worse than those you will find in Britain, exchange only enough before you leave to handle your cash needs for one or two days.
Use a Cash Machine
You can withdraw British pounds from a U.S. bank account using cash machines in Britain. Although over half the cash machines in Britain no longer charge fees, your own bank may impose a surcharge on withdrawals from an ATM that it does not own. Your own bank may also levy foreign exchange fees or surcharges for using cash machines abroad. Although you should research your bank's fees in advance to avoid unpleasant surprises, cash machines usually give better exchange rates than other methods of converting dollars to pounds.
Pay by Credit Card
When you use a credit card to pay for merchandise in Britain, your credit card company will convert British pounds to U.S. dollars for you. You can also use a credit card to obtain cash advances in the form of pounds from cash machines or banks. Generally, the exchange rate for credit card purchases is worse and the fees higher than when you use a debit card to obtain pounds. Ask your credit card issuer about foreign transaction fees before you travel, as some cards add up to 3 percent surcharges to the cost of all foreign currency purchases.