Dear Liz: I have a question regarding the use of credit cards for foreign transactions. Are the card companies required to use a certain exchange rate? I’ve used two different cards, and the one that charges a fee used a better exchange rate. The total cost to me, including the fee, was less than the other card. How can I find out what exchange rates are used?
Answer: You can always ask. Credit card companies may use a number of different exchange rates. Often they use the ones set by their payment networks, such as Visa or Mastercard, or by their issuing banks.
Keep in mind that exchange rates are constantly changing. Unless you used the two cards within a relatively short period, it would be hard to draw conclusions about which got the better rate. Also, you will get a much worse deal if you ever agree to a “dynamic currency conversion” that charges the transaction in U.S. dollars rather than the prevailing currency. When offered the choice, opt for the charge to be in the local currency.
Most travelers find they’re better off using a credit card that doesn’t charge foreign transaction fees. These fees are typically just another profit center for the issuing banks.
