Cash Conversion Fee, also known as a Foreign Transaction Fee, is a charge that can occur when you use your credit card abroad. The fee is a percentage of your purchase or withdrawal.
Avoiding these fees is easy. You can simply say no to dynamic 문화상품권매입 currency conversion (DCC) at the point of sale. You can also exchange your money at a local bank or credit union or use peer-to-peer payment services.
1. Check the Exchange Rate
While it’s not always obvious, many banks and money transfer operators apply currency exchange fees to the amounts they charge you for international purchases or cash transfers. These charges are based on the difference between the actual mid-market rate and the “swap” or “buying” rate they use to calculate your purchase or cash withdrawal.
The higher the swap or buying rate, the more expensive your transaction will be. This is why it’s important to check the exchange rate, either by using Google or a currency conversion app, before making any purchase or withdrawal abroad.
It’s also best to avoid paying in your home currency, whenever possible, so you can take advantage of the prevailing market rate and avoid high currency conversion fees. This is especially true for credit cards, which typically offer low currency exchange rates on purchases. In a NerdWallet analysis, Visa and Mastercard cardholders saved an average of 95% in transaction costs by using their credit cards when purchasing in foreign currency.
2. Use a Credit Card
When you pay in local currency with a credit card, your bank — typically Chase or Citi — doesn’t charge you a transaction fee. Instead, a network fee is charged (usually around 1%). You can find this information on your credit card’s website by searching “Schumer box” for fees or checking the general fee information that’s required to be listed under your interest rates.
In fact, credit cards tend to offer exchange rates closer to wholesale market prices than those at airport kiosks and money exchange stores. This is one reason why NerdWallet recommends using a credit card when traveling abroad. However, you may incur foreign transaction fees if you use your debit card or ATM card. This is because a merchant will still ask you to select the currency you’d like to buy in and your payment network — Visa, MasterCard, Discover or American Express—will do the conversion at the point of sale. This is called dynamic currency conversion or DCC.
3. Exchange Currency at a Local Bank or Credit Union
If you use a debit card abroad, you may incur currency conversion fees when you buy items or withdraw cash. These fees are the result of a process known as dynamic currency conversion, or DCC. They’re often levied by a credit card payment processor or ATM network, and the card issuer may also charge a foreign transaction fee.
Avoid paying the exchange rate and currency conversion fee by exchanging your money before your trip or at a local bank or credit union, instead of using an airport kiosk or hotel currency exchange bureau. You can also save on fees by using a credit card with no foreign transaction fee. And when you return home, your bank or credit union may be able to buy back any leftover paper currency in exchange for dollars, saving you the hassle of exchanging it at a foreign exchange store or kiosk. You can also use peer-to-peer payment services to send and receive money in different currencies without incurring these fees.
4. Use Peer-to-Peer Payment Services
Using P2P payment apps like PayPal, Venmo and Zelle can be a great way to send cash or credit without incurring a currency conversion fee. These apps allow users to link their bank accounts and transfer money quickly. However, you must be aware of potential scammers who may use these services to receive funds for illicit activities.
A currency conversion fee is a service charge levied by credit card payment processors and ATM networks when a purchase or withdrawal is made in a foreign currency. This fee is charged in addition to any fees charged by the merchant or at the point of sale itself.
To avoid paying these fees, always make purchases in the local currency. Avoid using ATMs at airport kiosks and stores, as they often have the worst exchange rates and charge fees. If you have to, exchange currency at a local bank or currency exchange bureau instead of an airport kiosk.