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Should You Pay in Local or Home Currency When Traveling?

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When traveling abroad and paying with Visa or MasterCard, you’ll often be offered an option at checkout: would you like to pay in local or home currency? Most people feel unsure about what to do and often think the price is the same!


The short answer is that you should always pay in the local currency. Meaning, if you’re traveling in Europe, pay in euros, in Japan, yen. But make sure this won’t incur a fee from your own bank…




When you pay in your home currency– i.e. dollars, for an American– you pay a roughly 3% fee for the ‘luxury’ of doing so. Merchants abroad partner with companies that provide DCC, or Dynamic Currency Conversion. Those companies’ software instantly provides the customer with the option to choose the currency. The extra fee they tack on is shared with the merchant, so both profit on your loss.


That 3% markup comes from using an artificial exchange rate, one that incorrectly calculates the price in the various currencies. Interestingly, Visa actually requires merchants to disclose that paying in your home currency will cost you more. But, in this author’s experience, this happens 0% of the time. Cashiers either don’t know about DCC or just don’t care. Regardless, you lose.


How to Beat the System


First things first- always pay in the local currency. However, be aware that doing so may cause your own beloved bank or credit card to charge you their own 3% fee! It’s called a foreign transaction fee, and it supposedly compensates the bank for the trouble they go through when converting your dollars into foreign currencies. There is an easy way around it.


Always use a credit card when traveling abroad. Many free travel-focused credit cards out there carry the fairly ubiquitous benefit of having ‘no foreign transaction fees.’ However, annual-fee cards include lucrative benefits that are often worth paying for! Fee or not, a travel card will virtually always offer travel insurance, fraud protection, and purchase protection in addition to the lack of foreign transaction fees.


Consider choosing the Barclaycard Arrival Plus when looking at travel cards. It’s the best of a small group of cards that offer chip-and-PIN technology. That means you enter a PIN number when paying as you would with a debit card in the U.S. Strangely, almost no popular travel cards offer this feature, even though it’s required all around the world.


Finally, if you don’t want a credit card or aren’t sure whether you’ll be able to pay it off in full each month, there are a select few debit cards that have no foreign transaction fees. Check them out here on NerdWallet.


Want to travel farther and spend less money to do so? 


How I Paid $8 for a 4-Day Getaway to Amsterdam


WLI’s Guide to Saving Money When Traveling


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