Rest assured that while vacationing in London, money matters are as simple as can be. Even throughout its E.U. membership the U.K. never switched over to the euro currency, always retaining its pounds sterling (GBP) and smaller-unit pence. Long gone are the days of shillings and sovereigns, and in London currency is accepted as readily in electronic from as cash, giving visitors from the United States the option to use their existing major credit and debit cards from the moment of arrival. However, London is an expensive city and it pays to save as many pennies as possible on exchange rates and other banking fees. A little research in advance of your trip will put more pounds in your pocket while you're there.

United Kingdom Currency: Pounds Sterling

The pound sterling, or just pound, is the basic unit of currency in England. As with the U.S. dollar, 1 pound is divided into 100 smaller units – the plural term is pence and the single term penny, and "p" is used both ways, written and spoken. Smaller currency in England leans more toward coins than bills (known in the U.K. as notes), as there are 1- and 2-pound coins, as well as 1-, 2-, 5-, 10- 25- and 50-pence coins. This change can add up quickly and be quite weighty. The pound is colloquially referred to as a "quid," 5-pound notes as "fivers" and 10-pound notes as "tenners." The term "coppers" refers to the smallest change, 1p and 2p coins. Know that in London, and all of the U.K., the price you see is the total price you'll pay – there will never be any added tax or other fees at checkout.

What About the Euro?

The euro is the official currency of the European Union and is used in the large majority of E.U. member states. The U.K. was always an exception. While it is not an official currency in London, the city's status as a financial and tourism center means that you will find some places where it is accepted. These are generally souvenir stores and other businesses targeting tourists. If you have euros left over from traveling in the continent, you can either try to spend it or exchange it at a bank. Spending it at stores means that you will be subject to the exchange rate the store is willing to offer at the moment, which might or might not be favorable compared with a bank rate.

Exchange Rates and Other Fees

Exchange rates will vary as you travel, and in tourist areas you will frequently see traders who specialize in converting currency, including American cash and euros into British pounds. Rates are often very clearly posted (look for the codes USD for U.S. dollar and GBP for Great British pound) and might seem competitive, but if you look at the small print or ask the money changer, you will find that there are associated fees. These fees are either a flat charge or a percentage of the money changed, and they can add up. Other places to exchange currencies that usually offer lower rates include local banks in London and many larger post offices. Some hotels also offer currency exchange on site.

You might exchange dollars to pounds in cash at your own bank or another local financial institution before leaving the U.S., although this can take some time in the case that the currency needs to be ordered. Airports generally host exchange bureaus as well. It's not advisable to carry very large amounts of cash on your person, but landing with enough cash available to get you through the first day or two can be convenient. This also gives you a little time to look into the best places to exchange more money before you run out of cash.

Using Your Credit Cards

Using a credit card overseas can be a great convenience, but in England, as in much of Europe, credit card transactions are often accompanied by the need to enter your personal ID number, or PIN. This is standard for debit cards in the United States, but not with credit cards. Before traveling to London, obtain a PIN for any credit card you plan to use. Some stores will print out a receipt for you to sign instead, but you should be prepared nonetheless. Also, check with your bank before you leave to find out if there are any fees or extra charges associated with using your credit card overseas, such as currency conversion charges. It's also a good idea to let your financial institutions know where and when you will be traveling to avoid any unnecessary security alerts on your accounts.

What About ATM Withdrawals?

Automated teller machines are common in London. You can use your debit card or a credit card to withdraw cash in pounds from any ATM simply by using your PIN. When you do so, the bank will automatically calculate the exchange rate and debit that amount, in U.S. dollars, from your account. This exchange rate is often better than that offered by money changers, but be sure to check with your bank for hidden exchange fees that can accrue each time you make such a transaction. Your bank, or the U.K. bank, also might charge you a transaction fee.

Tips About Tipping

Tipping is less customary in England in general than it is in the United States. It's considered a nice thing to do, but in most places not tipping will not cause any offense. Bartenders do not expect to be tipped for pouring beer or mixing cocktails. Tipping is customary for sit-down restaurant service, at 10 percent or 15 percent, but check your bill, since this is sometimes added automatically. Cab drivers expect to be tipped about 10 percent of the fare, generally rounded up to the nearest pound.