Is credit card foreign exchange rate good?
Large credit networks like Visa and Mastercard negotiate competitive exchange rates that are usually far better than the rates offered by DCC. It's almost never a good idea to accept the rate in dollars instead of local currency.
“The reason you get a favorable exchange rate with a credit card is the issuer is operating at much more scale and they're able to do a large volume of transactions,” said Greg McBride, the chief financial analyst at Bankrate, a personal finance site.
Depending on the credit card you use when traveling abroad, you could pay fees that total 6% or more of purchases. Using a credit card with no foreign transaction fees and choosing to make purchases in local currency will nearly always save you money.
Foreign transaction fees vary, but they're typically around 3% when levied by a card issuer.
Spending is almost always cheaper than withdrawing cash when you're on holiday. If you've a top overseas credit card, spending is almost always cheaper. Even on cards with no cash withdrawal fees, you'll usually still pay interest on the withdrawal until you pay it off.
| Card | Exchange rate | APR |
|---|---|---|
| Santander All in One Credit Card | Mastercard rate | 21.9% |
| Bip Cardless Credit | Mastercard rate | 29.9% |
| Zopa Credit Card | Visa rate | From 24.9% |
| Metro Bank Credit Card | Mastercard rate | 14.9% |
All else being equal (leaving aside card fees/rebates/benefits), MasterCard does generally provide the best exchange rates for the cardholder.
You can avoid your credit card's foreign transaction fee entirely by paying for purchases in foreign countries using the local currency instead of your U.S. credit card (or American dollars, if the vendor accepts them.) This isn't a perfect solution, however.
These fees can be avoided by choosing a bank account that doesn't charge fees and reimburses out-of-network ATM fees and by always withdrawing local currency from ATMs. Account holders can also ask their home bank if there are partner branches or in-network ATMs in the destination country or countries.
Using credit cards for purchases when possible and using ATMs to get local currency for when you need to pay cash are by far the best ways to pay for things when abroad because you will get the wholesale exchange rate rather than the less favorable retail rate posted in currency exchange facilities or at bank teller ...
Is it cheaper to use credit card or debit card overseas?
Credit card transaction fees are typically higher than debit cards. Shops may charge a fee, and banks may charge a conversion fee for the payment. If the merchant hasn't displayed fee notices, travelers should inquire with the staff. Credit cards may be subject to ghost charges or temporary holds.
If you want to keep a tab on the spending, a debit card can be a good option. Credit cards, on the other hand, are handy if you face a shortage of funds while travelling abroad.
Local banks and credit unions usually offer the best rates.
Some of the countries where a dollar is worth the most money include Mexico, Peru, Chile, and Colombia. It's possible to exchange dollars for local currency in these countries at favorable exchange rates.
Credit card issuers use currency exchange rates to bill you in U.S. dollars for transactions made in foreign currencies. These rates are set and updated daily by your card's payment network — Visa, Mastercard, Discover or American Express — and typically listed on your statement when you make purchases overseas.
While 3% may not sound like a whole lot, these fees can really add up over the course of an extended trip. For every $1,000 you spend, you'll be paying $30 in foreign transaction fees.
The benefits of paying in local currency
Your bank may charge a fee to carry out the transaction. The rate your card provider uses when processing local currency payments will, in most cases, be lower than that of the merchant, or foreign bank, when paying in dollars (USD).
| Credit card | NerdWallet rating | Rewards rate |
|---|---|---|
| Chase Sapphire Preferred® Card Apply Now on Chase's website on Chase's website | 5.0/5 Best for Bonus travel rewards | 1x-5x Points |
Though there may be a small fee if you exchange less than a certain amount, your bank or credit union will almost always be the cheapest place to exchange currency. You may be able to order currency at a branch location, by phone, or online to have it delivered to you or to pick up at a branch.
Visa and MasterCard charge a 1% currency conversion fee to the card issuer. The issuer has the option to pass along that fee, along with any additional fees it decides to add, and call the whole thing a foreign transaction fee.
Should you bring cash when Travelling internationally?
While credit cards are accepted in most situations, currency can be more convenient for public transportation and small vendors. It's also wise to carry an emergency fund with enough cash for a few days, just in case your card gets lost or stolen.
- Cash/Local Currency. Let's start with the most basic form of payment: cash. ...
- Opening a Bank Account. If you are abroad for a semester or longer, you may want to investigate the option of opening a local bank account. ...
- ATM/Debit Cards. ...
- Credit Cards. ...
- Apple Pay/Google Pay.
American credit cards work throughout Europe (at hotels, larger shops and restaurants, travel agencies, car-rental agencies, and so on); Visa and MasterCard are the most widely accepted. American Express is less common, and the Discover card is unknown in Europe.
Take to Europe only the credit and debit cards that you expect to use, plus a backup, and keep them protected from pickpockets in your moneybelt. Upon returning home, verify the balance and charges on your debit and credit cards.
Visa cards can also be a better option for frequent travelers, since cards in the Visa network are more widely accepted abroad. For someone who values prestige and rewards from a credit card, an Amex card could be the way to go.
