Credit Card-To-Currency Exchange

If you have a credit card with foreign transaction fees, they'll likely be noted as separate charges on your monthly statement. You should also be able to find information about them in the cardholder agreement, which your card issuer is required by law to provide upon request. 신용카드현금화

NerdWallet compared exchange rates offered by the two biggest card networks, finding that MasterCard was better more often than Visa, but neither one stood out as a winner.
1. Convenience

Credit card companies make a significant chunk of their revenue off international transactions, including currency conversion fees. That’s one of the main reasons credit cards tend to be more convenient than exchanging cash at a foreign exchange kiosk or even an airport currency desk.

The best way to avoid paying hefty currency exchange fees is to stick with using a card that doesn’t charge a foreign transaction fee. The next best option is to use a card that offers a competitive exchange rate. The big payment networks, such as Visa and Mastercard, publish a rate they select from customary industry sources each day. Those rates are publicly available through their websites in currency conversion tools.

Many credit card issuers tack on an additional 1% to 2% of the purchase amount in the form of a foreign transaction fee when you use your card abroad. A portion of this is used to cover the network’s foreign transaction fee, while the remainder is for the card issuer’s own fees, which include the currency conversion fee and other various administrative costs.

You can sometimes find a better deal by using your card at point-of-sale locations that offer dynamic currency conversion, also known as DCC. This service allows merchants to process your transaction in the home currency of your credit card, which can help you more easily figure out how much you are spending. However, you should be aware that these rates typically come with a markup over the wholesale market rate and you may end up paying more than you would have at a merchant that only accepts U.S. dollars.

If you do decide to use DCC, it is a good idea to compare the DCC rate to the Bank of Canada rate. This will give you a sense of how close the DCC rate is to the wholesale market rate. In a NerdWallet analysis, both Visa and MasterCard had exchange rates that were close to the wholesale market rate, so you shouldn’t have to pay too much for this convenience. However, if possible, you should always choose to use your card in the local currency to avoid DCC charges altogether.
2. Flexibility

Credit card networks offer competitive exchange rates that are more attractive than those you’ll find at currency kiosks, especially if you choose a credit card without foreign transaction fees. The fees charged by credit card issuers (like Chase or Citi) for processing payments made in a foreign currency are typically grouped together as one fee on your statement under “Fees” or “Pricing and Terms.”

In addition to the network’s FX fee, many cards have an additional charge from the issuing bank that can add up to 2 percent of the total amount of the purchase. Some card issuers subsidize part or all of the network fee, so you can end up paying only a single 2% FX charge.

Most card networks—including Visa, Mastercard, Discover and American Express—calculate blended exchange rates from a variety of customary sources and make them available to issuing banks on the business day prior to a transaction’s processing date. These rates are typically listed on your statement when you use your card overseas, and you can also check them online using the network’s currency conversion tools.

Some card issuers even waive the network’s FX fee on select card products. To determine whether a card has no FX fees, look for the phrase “no foreign transaction fee” in its advertising or on its website under “Pricing and Terms” or “Rates and Fees.”

When you make a purchase abroad, merchants sometimes ask if you want to pay in local currency or your home currency. This option is called Dynamic Currency Conversion, or DCC, and it’s generally more expensive than using your card issuer’s negotiated exchange rate.

NerdWallet looked at the rates offered by Visa and Mastercard in a number of currencies, and found that while they occasionally varied slightly, their rates were often quite close to the market’s. The best way to avoid DCC charges is to always pay in the local currency, which you can do by asking for cash at a shop or restaurant, using an app that displays current exchange rates, or simply memorizing the price of items in the local currency so you know how much to tip.
3. Security

When you pay in a foreign currency, your card issuer typically uses the rate offered by its payment network. It can often be better than the exchange rates charged by a retailer or ATM, which typically include a dynamic currency conversion markup that winds up costing you more overall.

While credit cards used to "embed" fees within their exchange rates, a court decision put the kibosh on this practice. Today, card networks (like Visa and Mastercard) publish blended exchange rates based on a wide range of wholesale and government-mandated sources and make them available to their issuing banks. Card issuers then use these rates to calculate your international purchase charge in USD and list it on your statement.

To avoid paying a DCC markup, choose to pay in the local currency whenever possible. If you can't do that, try to use a merchant that abides by the DCC regulations set by Mastercard and Visa. You should also review your credit card terms and conditions or the "Rates and Fees" section on your card's website to find out if it charges a currency conversion or foreign transaction fee. In most cases, these fees will be listed under the general "Fees" category.
4. Convenience

When you pay with a credit card in a foreign country, you usually have the option to pay in the local currency or your home currency. If you select your home currency, the purchase price will appear on the point-of-sale terminal in both currencies. If you choose the local currency, the purchase price will be converted at that time by the card network’s payment processor. This process is called dynamic currency conversion, or DCC. DCC prices typically include a markup over the current market exchange rate for the merchant, as well as fees and profit margins for the card network’s payment processor and the credit card issuer.

A merchant may offer to process your transaction in US dollars for convenience, but this often results in an inflated exchange rate that can cost you money. If a merchant offers this service, you should refuse it.

The best way to avoid paying a currency-exchange fee is to use a credit card that doesn’t charge one. The most common cards charge a foreign transaction fee of 2% to 3% on purchases made abroad, and some card networks also tack on a currency-exchange fee of around 1%.

However, it’s possible to find cards that don’t have either type of fee. And even if your card has a foreign transaction fee, you can avoid the currency-exchange fee by avoiding merchants that use DCC, or by using a reputable currency conversion app when you’re making purchases abroad.

Credit-card networks like Visa and Mastercard make a large portion of their revenue from international transactions by charging a fee to foreign merchants that’s based on the amount they collect from the cardholder. This fee is in addition to the foreign-transaction rate that you’ll see on your credit card statement, which will be adjusted according to the day’s market rates and other factors.

While avoiding fees and getting a better exchange rate is ideal, many travelers don’t realize that the rates offered by credit-card networks are generally competitive with those of currency-exchange kiosks. The good news is that your credit-card card issuer, like Chase or Citi, will likely give you a better exchange rate than a currency-exchange kiosk, especially when you use one of our recommended cards.