a group of different currency bills and coins

There are few things more exciting than an international trip. Paying for meals, goods, rides and shopping abroad however, is a different story. We’re moving towards a cashless society, and the more we rely on paying with plastic, the more variables come into play with each purchase. If you want to save at least a few bucks/pounds/yen/euros on every purchase you make, don’t fall for this one common trick…

a train going through a cityWould You Like To Pay In Local Currency, Or Your Home Currency?

If you have a card that doesn’t charge foreign transaction fees: choose to pay in local currency, EVERY time. Don’t pay in home currency- unless you’re in your home country. Why? Dynamic Currency Conversion. This is jargon for: charging you more money. When you choose to pay in your home currency versus the local currency where you are, the payment is processed using an inflated rate of exchange, rather than the bank rate- allowing the payment processor to make more money (for nothing) by taking more money from you. Not good!

We highly recommend using a card that does not charge foreign transaction fees for any foreign transactions. If your card does charge foreign transaction fees, you need to see whether it’s cheaper to pay in home currency or pay the foreign fee. More on that below.

a black wallet with a blue and black designThe Difference Can Be As High as 10% Per Transaction…

Buying a pint in England isn’t going to make you feel the burn for choosing the wrong currency. Paying for hotels, meals, shopping and other purchases that can run over $100 certainly will though! A $1000 hotel stay paid for in the wrong (foreign) currency could cost you an extra $100 in inflated currency transactions, versus just choosing to pay in local currency. By paying in local currency, your bank will use the actual rate of exchange, which is closest to “fair”.

a pool with lounge chairs and a building with water in the backgroundWhat If My Card Does Charge A Fee For Foreign Transactions?

If your card DOES charge a foreign transaction fee, which can be as high as 3%, it can still be worth paying in local currency. You’ll unfortunately need to pull out your phone and do some quick math. Let’s say you get the option to pay in your home currency of dollars and are offered $140, versus paying £95 in local currency in the UK. Even with a 3% fee, £95 comes to $130 MAX. So if you took the $140 option to pay in your home currency, you’d still be taking a loss. And on top of that, although some cards don’t charge a foreign transaction fee if paid in local currency, many will- just because the biller’s address is outside of the country. Double stuffed! The only way to figure it out is to do the math. Again, just don’t use a card that charges foreign transaction fees, to keep things simple.

a city with a bridge over a body of waterThis Is The Same Worldwide. So, Always Choose Local.

Hey it’s your money- but handing companies 10% of every transaction you make is just foolish. Pay in local currency, pay with a card that doesn’t charge foreign transaction fees and you’ll be maximizing every purchase abroad. Of course if you are using a card that earns points, airline miles or hotel points, that certainly doesn’t hurt either. Just don’t pay in your home currency while abroad, ever. No matter how charming and tempting the person makes it sound…


Gilbert Ott

Gilbert Ott is an ever curious traveler and one of the world's leading travel experts. His adventures take him all over the globe, often spanning over 200,000 miles a year and his travel exploits are regularly...

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  1. It’s worse than you think because some companies will also charge a flat surcharge and then also the currency conversion. Just ask Europcar as they are very bad about this in some areas.

  2. I assume that if your credit card charges foreign transaction fees of 2.5%, then you may be better off with and paying in home currency, no?

    1. Sadly no. You’d be charged the 2.5 percent fee AND you’d overpay on the transaction. Completely separate entities.

  3. So in other words when the clerk at the hotel check out desk hands you the payment processing maching and asks you if you want to pay in your home currency of US dollars and thereby avoid the 2.5% transaction fee charged by the card issuer, what you are faced with is the payment processing company exacting an unusually poor exchange rate (as compared to what your card issuer would normally charge)?

    1. Correct. This example is hairy, because it’s then a more complex calculation (if you’re being charged forex fees by your card issuer). I highly recommend picking up a card without forex fees, so that you can simply avoid the bad conversion rate without having to think about the fee.

  4. Understood. So in theory however, if the poorer exchange rate offered by the payment processor is only 2.5% or less difference from the card issuer rate, a card holder that carries a card with the 2.5% surcharge for foreign exchange, could end up with this being a wash. But what evidence is there that the payment processor exchange rate is drastically bad to the tune of up to 10%?

    1. Card issuers charge a foreign transaction fee and not a foreign currency fee will still charge the fees 2.5% or 3% or whatever as the biller still has a foreign address.

  5. It can be even worse … the majority of Singapore credit cards will also charge you a foreign currency fee regardless of the transaction currency (sometimes at a reduced rate of 1% other times the full rate up to 3.5%):

    a) if the transaction is in SGD but doesn’t occur in Singapore

    B) if the transaction does occur in Singapore but the company is registered abroad (I.e. You pay a fee for booking uber …!)

    So if you did pay in home currency you’d get very screwed!

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