Do credit cards offer good currency exchange rates?

Written by
Benjamin Pape
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Yes, there are cards from several credit card issuers that offer very competitive currency exchange rates. It is important to know though that there may be other fees in addition to currency exchange fees on international purchases including foreign transaction fees that should be taken into account when deciding what card to use while traveling abroad.

Currency exchange fees are a certain percentage that credit card issuers add to a transaction as a foreign currency-conversion fee. This means they offer the service of converting the local currency cost of an international purchase into the U.S. dollar amount that shows up on your credit card bill. Likewise, a merchant might add on a higher fee to convert the charge into U.S. dollars. The combination of charges depends on the varying rates from the card you use, the bank that issues the card, and the merchant’s policies.

When traveling outside the United States, you’ll almost always get the best possible exchange rate by using a major credit card with a hotel, airline or vendor. In addition, you’re avoiding ATM surcharges, cash advance fees, and the infamous surcharges at most exchange desks.

Watch out for the “convenient” service that’s becoming common in tourist-heavy cities around the world. Some merchants may ask you if you prefer to process your transactions in dollars instead of the local currency. While this option sounds helpful, the merchant’s bank typically applies an inflated conversion rate that could cost you more. Stick to processing your purchases in your vendors’ native currency, and your payment platform will handle the rest.

Foreign transaction fees, on the other hand, are charged by the bank on international purchases for the benefit of being able to use the card abroad. These fees usually range between 2-5% of each purchase and can add up quickly if you are making a lot of large purchases on a card that charges this fee. To avoid this, consider traveling with a credit card without foreign transaction fees. No foreign transaction fees is a common perk for popular travel credit cards such as the CardName and the CardName.

Regardless of which card you choose, research the exchange rate before travelling. Avoid the change bureaus you see in airports, train stations and touristy areas. They usually have the worst rates. Try to use credit cards whenever possible for large purchases, and stick to debit cards for withdrawals at the ATM for when you need cash.

Finally, if making an ATM withdrawal, try and do so at a bank that partners with your U.S. bank. Bank of America, for example, is partners with Barclays (United Kingdom), BNP Paribas (France), BNL D’Italia (Italy), and Deutsche Bank (Germany and Spain), among many others. By using your Bank of America ATM or debit card at an international partner ATM, you can avoid non-Bank of America ATM usage fees as well as receive the best exchange rate available. 

Benjamin Pape
Cardratings Contributor

Ben has been a credit card enthusiast for over seven years. With extensive knowledge in card benefits and travel partnerships, Ben has used his expertise to travel around the world with points and miles....Read more

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