Currency choice when using a credit card

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March 22nd, 2018 at 6:33:40 AM permalink
Wizard
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<p>On my trip to Europe, often when I charged anything I was asked if I wanted to be in Euros or dollars. I chose dollars, but had no good reason why. The machine showed what I would pay both ways but I didn't bother to do any math to calculate the lower price.

I can say that when I recently did a bank wire to Europe, Bank of America screwed me with an exchange rate about 2% off of market. In other words, I overpaid for Euros by about 2%.

Anyone have any advice on what to do in this situation if you don't want to bother with the math?
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March 22nd, 2018 at 7:11:51 AM permalink
DRich
Member since: Oct 24, 2012
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I agree with Dollars because you know exactly what the charge will be. Even if you have a credit card that does not charge foreign transaction fees, you do not know what exchange rate they will be using,
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March 22nd, 2018 at 9:17:04 AM permalink
AZDuffman
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Quote: Wizard


Anyone have any advice on what to do in this situation if you don't want to bother with the math?


Wizard wants to skip the math. Never thought I’d hear that! :-)
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March 22nd, 2018 at 7:30:39 PM permalink
Aussie
Member since: May 10, 2016
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You will generally want to have the charge go through in the foreign currency (in this case Euro). The currency rate your bank gives you will be better than the rate the merchant gives you. By choosing USD you are effectively paying for the currency conversion at the point of sale where the margin is much higher.
March 23rd, 2018 at 1:53:08 AM permalink
odiousgambit
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just waiting for Pacomartin to weigh in
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March 23rd, 2018 at 5:32:41 AM permalink
SOOPOO
Member since: Feb 19, 2014
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Quote: Aussie
You will generally want to have the charge go through in the foreign currency (in this case Euro). The currency rate your bank gives you will be better than the rate the merchant gives you. By choosing USD you are effectively paying for the currency conversion at the point of sale where the margin is much higher.


Not always. Many merchants at high end stores, which unfortunately my girl likes to shop at, just want to make a sale and will give you a good rate to make the sale. As an example, when the Euro was $1.10, and a pair of sunglasses was 275 Euros, the would sell them to us for a measly $300, slightly less than the true rate.

Some stores do not change the rate daily, so depending on which way the currency had moved recently you could make your decision, if you knew what the real rate is.

There are also examples of what Aussie says, as the small merchant charges 5-10% more than the fair rate.
March 23rd, 2018 at 6:25:24 AM permalink
Wizard
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Thanks for all the advice. I know when you buy something with USD in cash based on the foreign currency, you get screwed with an awful exchange rate, to the tune of 5% or so. This is especially true in Mexico. At the time, I thought the exchange rate was coming from the bank of the merchant and took a gamble their rate would be more favorable to me than an American credit card, which try to screw you any way they can, at least in my opinion. I recently got a $50 fee for being a few days late on a $20 payment.
Knowledge is Good -- Emil Faber
March 23rd, 2018 at 7:04:06 AM permalink
SOOPOO
Member since: Feb 19, 2014
Threads: 22
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Quote: Wizard
Thanks for all the advice. I know when you buy something with USD in cash based on the foreign currency, you get screwed with an awful exchange rate, to the tune of 5% or so. This is especially true in Mexico. At the time, I thought the exchange rate was coming from the bank of the merchant and took a gamble their rate would be more favorable to me than an American credit card, which try to screw you any way they can, at least in my opinion. I recently got a $50 fee for being a few days late on a $20 payment.


Local bars and restaurants here give a BETTER rate on the Canadian dollar to attract Canadians. When the American dollar was around 10% more valuable than a Canadian dollar you would see signs "Canadian at par".
March 23rd, 2018 at 9:32:24 AM permalink
Pacomartin
Member since: Oct 24, 2012
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Quote: Wizard
Thanks for all the advice. I know when you buy something with USD in cash based on the foreign currency, you get screwed with an awful exchange rate, to the tune of 5% or so. This is especially true in Mexico.


In such cases I don't think there is any legal control over the exchange rate. It is basically part of the haggling. I used to withdraw money from my bank account from a Mexican bank ATM and pay for everything in pesos. The NAVYFCU used to give me a good exchange rate with minimal fees.

I was under the impression that you kept a bank account denominated in Euros. Or did you give that up after the Cyprus disaster?
March 24th, 2018 at 8:31:50 PM permalink
Aussie
Member since: May 10, 2016
Threads: 2
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Quote: SOOPOO
Not always. Many merchants at high end stores, which unfortunately my girl likes to shop at, just want to make a sale and will give you a good rate to make the sale. As an example, when the Euro was $1.10, and a pair of sunglasses was 275 Euros, the would sell them to us for a measly $300, slightly less than the true rate.

Some stores do not change the rate daily, so depending on which way the currency had moved recently you could make your decision, if you knew what the real rate is.

There are also examples of what Aussie says, as the small merchant charges 5-10% more than the fair rate.




That’s why I said “generally”. Sure there will be examples when it is not he case but usually you will be better off having the charge made in local currency.

This becomes a moot point though as you will almost centainly find that there are many banking products out there that don’t charge any currency conversion fee at all so you can easily ensure that you are paying at the Visa/MasterCard rate published each day. This is typically very close to the market midpoint. When I travel I have a regular debit account loaded with cash and can be used for anything with the only charge being the fee charged by the ATM owner if I want to withdraw cash. FX rate is always very close to midpoint.