When paying for anything with a credit card outside the U.S., you should be asked whether you want to pay in U.S. dollars or the local currency.
The merchant might ask you, or the payment terminal might force you to select. But there’s only one correct answer: the local currency.
By opting to pay in the local currency, your bank will convert the charge at the current exchange rate. If you pay in U.S. dollars, you’ll pay more in the end due to the poor exchange rate offered by dynamic currency conversion.
Whether you take money out of an ATM or pay for a purchase with a credit or debit card, DCC works the same, and you’ll lose 3%-5% during the conversion. And, if your card has a foreign transaction fee or foreign ATM fee, you’ll stand to lose another 3%-5% on top of that.
And no, paying in U.S. dollars won’t let you avoid paying foreign transaction fees if your card carries them. Foreign transaction fees aren’t levied when you pay in a foreign currency, but when you make a purchase that’s processed by an overseas bank.
Merchants should ask you before charging you in a currency different from the local one. So, check your credit card statement when you return home to ensure all your purchases posted as you expected, and contact your issuer if a merchant didn’t post a charge in the currency you selected.
Check out the following stories to prepare financially for upcoming trips abroad:
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