While I’m currently traveling in Spain, every time I buy something, I’m asked whether I’d like to transact in Euros or U.S. dollars. This happens when I buy tickets to attractions online, on the credit card terminals at supermarkets, and on ATMs when I withdraw cash. Every. Single. Time.
Here’s an example when I was buying tickets to an attraction:
They are trying to catch people who don’t know what the going exchange rate is. The going exchange rate is 1 Euro = 1.11 U.S. dollars, but they proposed to charge me at 1 Euro = 1.15 U.S. dollars. The small print said it was a 2% markup. It’s actually more like a 3.6% markup. On one ATM I saw the rate proposed was 1 Euro = 1.28 U.S. dollars, a 15% markup!
At least on this web page it said something about the markup. At the supermarket and on ATMs, the machines don’t say anything. They just list two amounts: one in Euros or another in US dollars. If I pick the wrong one, they profit.
How do they know you are from the U.S.? The card you use gives you away. The first few digits of a credit card or debit card identifies the bank that issued the card. Their database can tell that your card is from a bank in the U.S. They then impose dynamic currency conversion, hoping to catch people not paying attention or accidentally hitting the wrong button. Although they must offer both the local currency and the home currency, they can engineer the screen to make it confusing and make you choose the home currency more easily.
The currency conversion prompt on ATMs is new to me. Sometimes the language on the screen also switches (in my case to Spanish) even if I selected English at the beginning. Some ATMs only have the local language, which makes it even more challenging to say no to the currency conversion prompt. From Wikipedia:
The screen on an ATM announces the exchange rate that will be used and asks whether the customer accepts or refuses that rate. It appears to be “take it or leave it.” There is NO explanation that refusal will not end the transaction, but rather means the exchange will be done without charging the commission.
So you have to remember this rule when you travel to another country: always transact in the local currency. Do what locals do. Forget that you even have U.S. dollars in your account. Pay in the local currency. Withdraw in the local currency. If you even see a mention of U.S. dollars, look for No or Cancel. Of course also use a card with no foreign transaction fee for purchases and a card that rebates ATM fees. When the charge comes in a foreign currency, your bank will convert it using a more favorable rate from Visa or Mastercard.
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Joe McNeill says
I agree 100% – I always transact in the local currency.
I want to add, that Amazon is now doing the exact same thing to buyers with foreign cards. They make it very confusing and ask what currency your card is denominated in. This is a red herring – if you say it’s in a foreign currency, they convert the cost at an inflated exchange rate. Much better to say your card is in US dollars and let your card convert to your home currency.
always_gone says
What up-charge, if any, does Visa charge on exchanges?
Harry Sit says
Visa’s online calculator shows a 100 Euro charge submitted today will come in as $110.79 to a card in the U.S. Mastercard’s online calculator shows the same charge will be $110.95. TransferWise shows if I want someone to receive 100 Euros, it will cost me $110.85 before fees added by TransferWise. In this instance Visa’s rate is the lowest. On a different day or for a different currency, Mastercard may be the lowest. When the three rates are within 0.15% of each other, that’s close enough to zero up-charge to me.
Sam Seattle says
This is good info to know, Harry. Thank you for posting.
Mike Blast says
Thank you, great tip! I’ve been using it while traveling for quite some time now and it saved me big time. It feels bad to think that they are trying to literally rob you on such small things though but what can you do, right? Another great tip is that you should always carry local cash with yourself, at least a small amount. It will save you hundreds of times, trust me. From a moment that you want to take a quick taxi in case of emergency to being stuck somewhere with your car broken in the middle of the country – cash is king for me. I’ve read an article about it a few years ago and can’t describe how many times it saved me on the road!
Dave R. says
Just to add… if you pay with a card that charges a foreign transaction fee, you will likely still be assessed the fee even if you chose to pay in dollars.
Reference: https://www.valuepenguin.com/credit-card-foreign-transaction-fees