Why You Should Always Pay in Local Currency When Traveling


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When you consider which credit card to apply for, you might first notice if a card has a signup bonus or offers a high rate of rewards. But if you plan to travel internationally, should look past the rewards and make sure you’re getting an increasingly common card benefit: zero foreign transaction fees.

When you use your debit or credit card in another country, your bank must convert that charge to U.S. dollars so it can withdraw the money from your account. Fees for this can range between one and three percent.

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That may not seem like a lot, but there’s an added benefit of using a card that doesn’t charge this small fee: You can also avoid the latest traveler scam.

Vindu Goel tells his story in the New York Times: While eating at a popular tourist attraction in India, the server added 5% to the bill, then presented the receipt in dollars instead of Indian rupees. The server didn’t ask for his permission to do so, which Goel points out is required by Visa and Mastercard. The move is called dynamic currency conversion. “Foreign merchants add a stiff markup to your bill, convert it to your home currency, then claim it benefits you,” Goel explained.

It’s not just tourist attractions who pull this maneuver. Goel, who travels internationally frequently, said he’s seen it everywhere from neighborhood drugstores to big hotel chains. Sometimes you’ll be given choice on the card machine to pay in the local currency or your home one.

Here’s where the zero-transaction fee card comes in handy. If you have one, you can always choose—or demand, if need be—that the purchase be rung in local currency. If you have an American Express card, you don’t have to worry about this—it doesn’t allow dynamic currency conversion.

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Then, Goel says, you should double-check your receipt to make sure the business didn’t switch the currency without your consent. “The giveaway that you’ve been hit is when the charge slip lists an amount in your home currency with microscopic print that claims you gave consent,” he wrote.

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If you discover this and the merchant won’t void the purchase and re-ring it, Goel says to dispute the charge.