Related: Dynamic currency conversion, and why you should avoid it
You may know how to avoid the foreign transaction fees that are charged on certain basic credit cards. And you may even know to always pay in local currency when using your credit card overseas. But do you know about exchange rate mark-ups on cash withdrawals from foreign ATMs?
I didn't — at least until this morning. I'm currently in Chiang Mai, Thailand, and withdrew some extra baht from a nearby ATM in anticipation of my first-ever scooter rental.
Since my Schwab debit card refunds all of my ATM transaction fees, I never purchase foreign currency from a bank, either at home before my trip or in the local country upon my arrival. Instead, I use my credit cards until I need cash, then go to the nearest ATM and take out the amount I need in local currency.
I only needed about $30 to cover my expenses for the rest of my trip, so I quickly selected the "1,000 Thai baht" easy withdrawal option on the interactive touch screen while daydreaming about the Thai milk tea I was looking forward to ordering.
That brief moment of distraction was enough for me to overlook one unexpected line item on my final summary:
That's right: There was an additional column for "withdraw with conversion" on the right side of the screen, where my eyes are somehow more used to seeing final sums — especially in U.S. dollar rates.
I had used another ATM just a few days prior, which did not include currency conversion rates and had the "confirm" button also located on the right side of the screen. So I mindlessly pressed "accept with currency conversion" button, just in time for my brain to crash out of autopilot mode and register the words shining through the screen amidst the glare of reflected sunlight.
As you can see from the innocuous-looking green page in the photo above, the first thing you should notice is that the ATM withdrawal fee (called an "access fee" here), is a whopping 220 baht — or $7.79 by today's exchange rate. The second fee I paid was the "exchange rate mark-up," which was nothing more than a gratuitous 5.5% tacked on for no reason other than the convenience of seeing my transaction amount converted into my home currency.
This exchange rate mark-up is the debit card equivalent of dynamic currency conversion for credit card transactions, but I had never seen one before today and thus was not enough on my guard to watch for hidden fees.
This pricy oversight cost me 83 baht — about $2.75 in U.S. dollars — on a $33.16 ATM withdrawal. And that's even before factoring in the $7.79 access fee. All told, I paid just over $10 — more than 23% — for the privilege of getting to the cash I already own. Thank goodness for my Schwab card, which will refund me the $7.79 access fee.
Related: Debit cards that don't charge transaction fees
The $2.75 is a relatively cheap lesson fee to pay for the reminder to always read the fine print, even when I think I know exactly how the process works. (And now I'm sharing my class notes with you guys!) But it's also a good rule of thumb to remember what other hidden costs may be lurking behind familiar charges when overseas, and refresh your personal knowledge accordingly before your next international trip. Just think: If I had withdrawn 10,000 baht instead of 1,000, that mistake would have cost me an additional $27.50!
