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Do the math. Will your rewards outweigh the foreign current rate fees?
Brilliant. Why didn't I think of that?
Lots of the good US cards don’t charge foreign transaction fees - Amex platinum/gold, chase sapphire reserve. Use the US card if there are no fees
Most cards give you great exchange rates, better than what you would be able to get if exchanging cash.
You're going to have to do the math on that one. We don't know the cards or your home country.
Anything under 3% would favor using any decent US travel rewards cards
Rising Star
I mean the rate changes every day so it could be better or worse. I guess it also depends on the currency and how much the bank charges but I would assume a 4x or even 3x category should outweigh the conversion difference.
Not asking about fluctuations in FOREX but rather the spread that the banks use to make a profit. Are they taking an extra 1, 2,3 % for their conversion rate relative to the market?
The cards (e.g., Chase Sapphire Preferred) don't charge foreign transaction fees, so to do the math, I need the conversion rates used, which are changed daily. For visa, I found the following calculator: https://usa.visa.com/support/consumer/travel-support/exchange-rate-calculator.html
and compared to x-rates.com.
The calculator assumes a 2% bank fee: "Processing fee charged by your bank or financial institution. 2% is an average bank rate, but fees vary, so check with your bank for their bank fee rate."
On top of that, there is another 1%, so it seems to be about 3% more relative to no conversion using local credit cards.
How can I determine what the bank fee will be?
Depends on which card you are using. A lot of cards offer real time exchange rate which is neat.
Yes, but what is the margin relative to the market rate?
Thanks for the replies thus far but they've been useless, so I asked chatGPT:
"The foreign currency conversion rate for credit card transactions in local foreign currency is determined by the credit card issuer and the credit card processor (Visa, Mastercard, American Express) 1. The currency conversion fee (also known as a network fee) is charged by your credit card processor and can also be charged by the ATM network you use. For example, Visa and Mastercard both charge a fee of 1% on all transactions 1. Additionally, your credit card’s issuer (like Chase or Citi) will charge you a percentage of the amount of a transaction (typically 2%) to process 1."
Perhaps this is true.
It would be nice if someone knowledgeable could confirm.
Thank you!
Interesting. Thanks, this is more in line with what I’m looking for.
There are many cards out there which do not charge a foreign transaction fee. Assuming you have one of those, the only "loss" is from an unfavorable exchange rate used by the card network (Visa, AMEX, Mastercard). Those exchange rates will usually be close but not perfect (expect at least 0.25% unfavorable variance).
Not all cards give the same rewards multipliers overseas. For example AMEX only counts American restaurants for bonus category on certain cards.
Lastly, keep in mind that the interchange/processing fees on American cards are significantly higher than in other countries (in some cases double or triple, hence the generous rewards that card issuers pay out to cardholders). If you are wishing to patronize a locally owned small business in your home country, think twice about the impact. Depending on the country and the business, there may be fees to use foreign credit cards.
Again I should emphasize that the circumstances are very different by country. Each has different laws regarding credit card processing, interchange fee caps, permissibility of extra fees charged to foreign card issuers. Not to mention local customs/norms when it comes to payment. I would be sure to keep a local credit card in your wallet in case issues arise