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Foreign currency transactions


AllisonJames
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Last year for our British Open Cruise I took a lot of advice from this board regarding money matters (use credit cards for most transactions, don't exchange $ at airports, etc.). We did exchange dollars for a small amount of pounds and euros at our bank before we left and we're glad we did because we used it right away and didn't have to search for an ATM upon arrival. However, I feel silly that I didn't immediately know the answer to the question I was asked when I purchased something using a credit card in stores which was "Do you want the transaction in U.S. dollars or pounds (or Euros)." Not expecting this question, I probably gave the wrong answer but I didn't buy a lot so no big deal. Now that I think about it, I assume the answer is U.S. currency because the credit card exchange rate is probably a better deal than the stores? Am I correct?

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If the merchant bills you in USD then they will use their own (probably poor) exchange rate. If you are billed in Euros or GBP then the conversion will be at the card issuers rate (much better). The fly in the ointment is whether you will get a foreign transaction fee which will, in all probability wipe out any advantage. Best tip is to get a credit card with no foreign transaction fees - I believe they have some in the US.

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If the merchant bills you in USD then they will use their own (probably poor) exchange rate. If you are billed in Euros or GBP then the conversion will be at the card issuers rate (much better). The fly in the ointment is whether you will get a foreign transaction fee which will, in all probability wipe out any advantage. Best tip is to get a credit card with no foreign transaction fees - I believe they have some in the US.[/quote

 

The clear answer is to always use a credit card without any foreign transaction fee and there are many US credit cards with no foreign transaction fees both cards with annual fees and those without. All capital one cards are fee free and no foreign transaction fees. INHO not the best card for perks but, fairly easy to get without any annual fees or foreign transaction fees. You will pay that fee no matter if the merchant charges you in US dollars or foreign currency. And ALWAYS as the previously poster stated, have them charge you in the foreign currency. No doubt about it, the merchant conversation rate will be significantly worse than the rate the credit card will charge you and the reason they give you that choice is to increase their profit.

 

By the way, the merchant's conversion will ALWAYS be higher than the card fees and to clarify the previous poster, in the US foreign conversion rates are NOT done by the issuer of the card but by the type of card, i.e. Visa, Master Card, American Express, Discover, etc.

 

No ands, ifs, or buts

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Thanks. I posted my last sentence incorrectly -- I meant to say the correct answer is foreign currency because the credit card exchange rate will be better than the store's and your answers have reiterated my assumption. This year, I will know the right answer :)

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Yes the MasterCard or Visa rate will always beat the rate you are offered in store. So I agree always make the transaction in your home currency. You will still pay a foreign transaction fee even when the conversion has been done at the point of sale.

 

And yes, better still get a card which does not charge a foreign currency fee, even if it means forgoing points on overseas transactions.

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Yes the MasterCard or Visa rate will always beat the rate you are offered in store. So I agree always make the transaction in your home currency. You will still pay a foreign transaction fee even when the conversion has been done at the point of sale.

 

And yes, better still get a card which does not charge a foreign currency fee, even if it means forgoing points on overseas transactions.

I think you mean to make the transaction in local currency so your credit card company will convert it, not the merchant. True?

 

Also, my credit card gives 2% cash back and charges 1% conversion, so I'm still ahead..

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I think you mean to make the transaction in local currency so your credit card company will convert it, not the merchant. True?

 

Also, my credit card gives 2% cash back and charges 1% conversion, so I'm still ahead..

 

Yes so the credit card company converts it. That's the view I was supporting..

 

"Local" to me means in the immediate vicinity, so "local currency" to me means the currency in the country where you are making the transaction.

 

Therefore make the transaction in your home currency. If you are US, then USD. If you are Aussie then AUD etc.

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Please let my mistake help explain this. After having a flight cancelled and getting to our destination delayed by 24 hours and exhausted, I answered the question wrong. I thought I said Euros, the local currency, but discovered when the credit card bill came in that I had said USD. It took a bit of sleuthing and a chat with my bank who issued the card to discover my mistake. The cost was 6% on top of my charge after the charge was converted at the going rate. 6% on top. That might vary by the merchant. But when you have worked hard to get the best card with no foreign transaction fee and no currency conversion charge, an ATM card that doesn't charge foreign penalties or any ATM fees and then you pull an exhausted bone head move, that 6% seems pretty steep. Next time I travel abroad I will add to my phrases to memorize: along with "excuse me, I'm sorry, do you speak English, I don't speak your language, where is the bathroom, thank you and my new phrase, "please charge my transaction in your local currency, please."

Edited by SuzCruise
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Please let my mistake help explain this. After having a flight cancelled and getting to our destination delayed by 24 hours and exhausted, I answered the question wrong. I thought I said Euros, the local currency, but discovered when the credit card bill came in that I had said USD. It took a bit of sleuthing and a chat with my bank who issued the card to discover my mistake. The cost was 6% on top of my charge after the charge was converted at the going rate. 6% on top. That might vary by the merchant. But when you have worked hard to get the best card with no foreign transaction fee and no currency conversion charge, an ATM card that doesn't charge foreign penalties or any ATM fees and then you pull an exhausted bone head move, that 6% seems pretty steep. Next time I travel abroad I will add to my phrases to memorize: along with "excuse me, I'm sorry, do you speak English, I don't speak your language, where is the bathroom, thank you and my new phrase, "please charge my transaction in your local currency, please."

 

It is the view in this thread that if you pay in the local currency, not your home currency, you will pay more. Your experience seems to be the other way around?

 

I suggest your phrase should be "I don't want to pay in your currency thank you".

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It is the view in this thread that if you pay in the local currency, not your home currency, you will pay more. Your experience seems to be the other way around?

 

I suggest your phrase should be "I don't want to pay in your currency thank you".

 

Why would I ask to pay more? If you pay in your local currency and have the merchant's bank do the conversion, instead of your credit card doing the conversion, you will pay more.

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Why would I ask to pay more? If you pay in your local currency and have the merchant's bank do the conversion, instead of your credit card doing the conversion, you will pay more.

 

We are getting tongue tied on the term "local" currency.

 

I think we agree we should NOT let the merchants bank do the conversion. My last post was misleading. Sorry.

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My Capital One and Discover Card charge no international or transaction fee. So I always just let them charge their current local rate because I know I'll get my best conversion credit card rate. I also am aware that Discover is not widely accepted internationally. I'd use my Citi Costco cards because they pay more cash back for travel and restaurants but they also charge a 3% international transaction fee. So they won't be used internationally.

 

I just got a debit card (I hate them but use only for international travel) from my brokerage account because they will reimburse any ATM fees and it can be used at any international ATM that has the Visa logo. I have a small amount for travel should something compromise the card but can via internet transfer more cash into the account from another cash account at the brokerage overnight if I need it quickly.

 

Otherwise I will prepay online for transportation, tours and other things that I can before the trip via credit cards.

Edited by ChucktownSteve
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