Dear Liz: Are the card companies required to use a certain exchange rate for foreign transactions? I’ve used two different cards for purchases abroad, and the one that charges a fee used a better exchange rate so the total cost to me, including the fee, was less. How can I find out what exchange rates are used?
Answer: Credit card issuers can choose the exchange rates they use, although many employ the rates selected by their payment networks, such as Visa or MasterCard. These rates are typically close to the wholesale interbank rate.
Issuers can also choose when to make the exchange. The issuer may use the rate in effect when the transaction is processed, for example, which may be different from the time of purchase. So even if you used the two cards the same day, you might not get comparable exchange rates.
You can find more information about how your cards process foreign transactions in the cardmember agreement you received when you got the card. If you no longer have that document, you can request the issuer mail it to you or check the Consumer Financial Protection Bureau’s credit card agreement database.
Since most issuers use near-wholesale exchange rates, travel experts typically recommend using credit cards without foreign transaction fees to save money. You should also be wary of “dynamic conversion” — the offer you often get at the point of sale to have the transaction processed in your home currency rather than the local currency. Dynamic conversion rates are typically terrible with big markups, so always choose the local currency.
