Foreign Transaction Fees–Euros or Dollars

When staying abroad I was pretty confused when a waiter asked me whether I wanted to pay in Euros or Dollars after having made a purchase.  I leaped at the chance to purchase in dollars, figuring maybe I could avoid a foreign transaction fee from my credit card by doing so, the chase freedom card which charges a 3% foreign transaction fee.  The conversion rate they were offering me didn’t seem terrible, about a 2% upcharge from what google told me, so I figured that I’d go ahead and take it. Imagine my surprise when I checked the internet only to find that, according to the internet, I was terribly wrong.

The Internet’s Take

Article after article I checked suggested, in short order that I had been duped by a shady network of banks intent only on robbing me under the thin veil of providing the dubious convenience of paying them substantially more in dollars than my bank might have charged.  Some articles I read suggested that fees could be as much as 4-10%!  In a panic I went over my account statement and receipt to try to figure out where these nefarious banks were screwing me out of the additional 2-8%.  Fortunately for me the answer seemed to be…nowhere.

My Experience

Chase hasn’t charged me their 3$ foreign transaction fee for that transaction.  Maybe that was an oversight on their part, but I’m not sure.  My original plan when I visited Europe was to take advantage of Discover’s no foreign transaction fee policy with gusto.  There were two problems with this plan.  First, I wasn’t able to find basically any place willing to take discover, or as they call it “Diner’s Club International”.  Second, I believe this was because I wasn’t able to find that many places that took a card where I was at all anyway!

After making several more transactions I noted that the surcharge being offered in order to pay in dollars rather than euros seems to be quite reasonable.  Generally I saw markups between 0 and 5%. Most of which fell between 1-2%. It seems that the banks have gotten substantially less greedy over the years.

Bottom Line

While the rule of thumb has always been to go ahead and choose to pay in the local currency, in my case euros.  It seems there are occasionally special exceptions.  If you are using a credit card with a foreign transaction fee higher than the markup you will pay (most of the time the amount of the markup was advertised before I had to make the choice), it could be in your best interest to go ahead an pay in dollars.

I have read that sometimes your credit card will go ahead and charge you a foreign transaction fee anyway.  This is certainly the worst of both worlds.

Of course the real way to solve this problem is simply to avoid it all together.  If you use a card which doesn’t have any foreign transaction fees, most travel cards for example, then you simply choose to pay in the local currency every time.  This is certainly what I’ll be doing next time I’m abroad.  But, for the meantime, if you’re stuck between bank fees, don’t just assume everything you read on the internet is true.

Adam Woods

Adam Woods is a physicist. His research interests include building software to run and build geomagnetic models. Adam got interested in personal finance in the great recession when it became obvious an interest was necessary.

After harassing his friends and family (and a short intervention) he took to the web where he blogs about finance, investment, politics, and economics.

Adam is currently located in Boulder, Colorado where he can generally be found hiking, biking, or running a D&D campaign. He can also be contacted at adamwoods137@gmail.com.