When paying with a card in foreign currency?

Should You Pay in Dollars or Local Currency Abroad? A Simple Trick to Save Money

Traveling to a new country is exciting, but navigating foreign currencies can be confusing. One seemingly innocuous question at the checkout counter can significantly impact your travel budget: “Would you like to pay in dollars or the local currency?” The answer, almost invariably, is to choose the local currency. Here’s why.

When you’re given the option to pay in your home currency (e.g., US dollars) while abroad, it seems convenient. You see the price in a familiar currency, eliminating the need for mental calculations. However, this convenience comes at a cost. This practice, often called Dynamic Currency Conversion (DCC), allows the merchant or their payment processor to set their own exchange rate. And that rate is almost always worse than the rate your bank or credit card company will offer.

Essentially, by opting to pay in dollars, you’re giving the merchant permission to mark up the exchange rate and pocket the difference. This hidden fee can add up quickly over the course of your trip, eating into your souvenir budget or that extra delicious meal you were eyeing.

Your own bank or credit card company typically uses the wholesale exchange rate, which is much closer to the actual market value of the currency. While they may charge a small foreign transaction fee (typically 1-3%), this is still usually significantly less than the markup imposed by DCC.

So, how do you avoid this sneaky charge? It’s simple:

• Always choose to pay in the local currency. Even if it seems a little more complicated to calculate the cost in your head, it will save you money in the long run.
• Look closely at the payment terminal. It might ask if you want to be charged in your home currency or the local currency. Be sure to select the local currency.
• Check your credit card statement carefully when you get home. If you see any charges in a foreign currency that you didn’t authorize, contact your credit card company immediately.

By following these simple tips, you can avoid unnecessary fees and keep more of your hard-earned money for enjoying your trip. So, the next time you’re at a Parisian cafe or a bustling Bangkok market, remember to pay in the local currency. Your wallet will thank you.