Is it better to pay in local currency or card currency?

When you’re traveling, using credit or debit cards to pay for things and make cash withdrawals is convenient and offers safety benefits compared to carrying around lots of cash. Depending on the card you pick and how you use it, spending with a card could also keep down your overall costs by helping you get a good exchange rate and low transaction fees.

This guide walks through things to consider when using a card overseas, and how to decide when to pay in local currency – plus we’ll cover some low-cost cards for international travel, so you can do more with your money when you’re away from home.

Key points: Pay in local currency or USD?

  • Dynamic currency conversion can mean you spend more if you choose to pay in USD overseas
  • Paying in USD to make an ATM withdrawal abroad can mean you spend more in the end, thanks to unexpected fees and a bad exchange rate
  • Some debit and credit cards also charge foreign transaction fees which can push up the costs of spending abroad
  • Getting a card from a bank or non-bank alternative which has no foreign transaction fee can reduce the amount you spend in the end
  • Specialist providers like Wise and Revolut allow customers to hold foreign currency balances to instantly convert and spend as needed

Choosing a travel card with no foreign transaction fees can keep the costs of spending in foreign currencies down. Specialist travel cards like the Wise card and the Revolut card don’t have foreign transaction fees and offer mid-market rates for currency exchange. This can mean your foreign currency spending costs less overall.

Go to WiseGo to Revolut

Paying in local currency vs card currency

When you pay for things, or make cash withdrawals, overseas, you might be offered the choice to pay in USD or the local currency wherever you are.

If you pay in the local currency in your destination, your credit or debit card will usually set the exchange rate you get to convert your costs back to USD. The card issuer will also control any fees you pay, such as a foreign transaction fee.

If you agree to pay in USD it works differently. The merchant or the ATM operator is free to set the exchange rate being applied, and may also add fees. These costs come on top of any charges your card issuer or bank makes.

Here’s a quick summary of some key points when it comes to paying in local currency vs paying in US dollars:

Paying in local currencyPaying in home currency
  • Your card can convert USD to the required currency, or you can spend from a foreign currency balance
  • Some cards have low or no foreign transaction fees
  • Services like Wise and Revolut can show you instantly what a transaction cost you in dollars, so you don’t need to do a manual conversion
  • You can instantly see how much you’re spending in USD
  • The merchant or ATM operator will set the exchange rate being used
  • You may not be able to see all the fees involved before you confirm a transaction

Most US banks only allow you to hold a balance in USD, but when you spend your card can convert your dollars to the required currency instantly. It’s pretty common to find a foreign transaction fee is applied when this happens.

Specific low cost travel cards can help you get around this issue, by letting you hold a balance in foreign currencies which you can then spend with no additional charge to pay. Providers like Wise and Revolut let you add money in USD and convert to the currency you need for spending either in advance or at the point of payment. You’ll often find you get the mid-market exchange rate with low or no fees, as well as the convenience of managing your money right from your phone.

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Wise card with no foreign transaction fees for travel internationally

Benefits of paying in local currency

  • Your card issuer or bank can decide the exchange rate used, which is often reasonably fair
  • If you pick a card with low or no foreign transaction fee you can keep down overall costs
  • You can use your card to pay in local currency at an ATM whenever you need cash
  • Some non-bank providers like Wise and Revolut let you hold a foreign currency balance which you can spend with no extra fees
  • If you have a multi-currency balance facility you can lock in good exchange rates when you see them, to build your travel budget
  • Many card issuers let you get instant transaction notifications on your phone so you can see what you’ve spent

Should I pay in local currency or USD on credit card?

If you use a credit card to pay for things overseas, or when you’re shopping online and paying in a foreign currency, you may find you need to pay a foreign transaction fee. Not all banks and card issuers have foreign transaction fees, but where they apply they can push up the costs of your foreign currency spending by around 3%.

To keep the costs of spending as low as possible when using a credit card overseas, look out for a card which has no foreign transaction fee, and then choose to pay in the local currency wherever you are. That way the card will convert your spending back to USD for billing using the network exchange rate – which is usually pretty fair.

Both American Express and Discover have no foreign transaction fees for US customers, but it’s worth bearing in mind that these networks aren’t always as popular overseas as they are at home. Looking out for a no foreign transaction fee credit card issued on Visa or Mastercard may mean your overseas spending is easier. Major banks, such as Bank of America, do issue no foreign transaction fee cards on Visa and Mastercard, but you might need to pay an annual fee.

As an alternative, consider using a debit card with no foreign transaction fee. More on that next.

Should I pay in local currency or USD on a debit card?

Using a debit card can work out to be cheaper than using a credit card in many cases as you won’t need to pay interest, and there’s generally no cash advance fee to worry about either. However, it’s still pretty common to find that debit cards come with a foreign transaction fee, which will put up the costs when you spend and withdraw in foreign currencies by around 3%. This fee applies on cards issued by major banks like Bank of America and Wells Fargo, for example.

It is still possible to find debit cards which don’t have a foreign transaction fee to pay. Using a no-foreign transaction fee card and paying in the local currency wherever you are is usually the cheapest option available.

We’ve got a quick overview of some low cost travel cards from both banks and non-bank alternatives coming up in a moment. You might want to consider options like Wise, Revolut or Chime which can all help you manage your money digitally with relatively low costs.

3 Travel cards to keep the costs down abroad

Using a dedicated travel card which has been designed for international travelers is a smart way to manage your money internationally with lower overall fees. Here we’ve featured a quick overview of 2 non-bank providers – Wise and Revolut, and one huge international bank – HSBC. We’ve got a little more detail about each coming up in just a moment to help you decide if any might fit your needs.

FeaturesWise cardRevolut cardHSBC card
International transaction feesNo Wise foreign transaction fee, currency conversion costs from 0.35%No Revolut foreign transaction fee, 0.5% fair usage and 1% out of hours fees may apply for currency conversionNo HSBC foreign transaction fee, currency conversion uses the network rate
International ATM withdrawal feesNo fee to make 2 withdrawals/month to value of 100 USD – low charges after thatSome no fee withdrawals monthly, depending on account tier – low charges after thatNo HSBC withdrawal fee
Maintenance feesNone0 USD – 16.99 USD/month depending on account tierFees depend on the linked checking account
Exchange ratesMid-market rateMid-market rate used on weekdays to plan limit, fair usage and out of hours fees may applyMastercard rate
International coverageGlobally supported for payment and withdrawalsGlobally supported for payment and withdrawalsGlobally supported for payment and withdrawals

*Details correct at time of writing – 7th May 2024

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Wise card

You can open a Wise account online or in the Wise app and order your Wise international debit card for a low, one time fee. Add money in dollars and you can either decide to convert to the currency you need to spend when you travel right away, or to just let the card convert what you may and make withdrawals. In either case you get the mid-market exchange rate, low, transparent fees, and no ongoing or maintenance costs.

  • Hold and exchange 40+ currencies with the mid-market rate
  • Free to spend a currency you hold, with some free ATM withdrawals every month
  • Autoconvert technology to switch at point of payment if you don’t have the required currency
Wise card prosWise card cons
✅ No ongoing fees or minimum balance

✅ Issued on Visa and Mastercard networks for global acceptance

✅ Spend in 150+ countries, hold 40+ currencies

✅ Some free ATM withdrawals monthly

❌ Currency conversion fees from 0.35%

❌ Card delivery can take 14 – 21 days

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Revolut card

Revolut US has several different account tiers which lets you pick the one which best suits your personal preferences and needs. You can get a Standard plan with no ongoing charges, or upgrade to an account tier with monthly fees which also has more features and higher no-fee transaction allowances. All account tiers offer some no-fee currency conversion Monday to Friday, and some also offer no-fee ATM withdrawals when you travel.

  • Choose from different account plans based on your spending needs
  • Some no fee weekday currency conversion for all account holders
  • Accounts hold 25+ currencies, or you can just leave your money in USD for instant conversion at the point of payment
Revolut card prosRevolut card cons
✅Different account options available

✅ Hold and exchange 25+ currencies, spend globally wherever your network is supported

✅ Some no fee currency conversion during market hours available to all customers

✅ Suitable for spending in person and online

❌ Monthly fees apply to get full feature access

❌ Fair usage and out of hours fees may apply

Go to Revolut

HSBC card

HSBC US has debit cards which you can link to a selection of checking accounts. All accounts are USD denominated which means you can’t hold foreign currency – but whenever you spend your funds are simply switched over to the currency needed instantly by the card, using the network rate. HSBC does not have an ATM fee, but the ATM operator themselves may charge you for withdrawals, so it’s worth watching out on the screen to check before you confirm a transaction.

  • No HSBC foreign transaction fee and no HSBC ATM fee for overseas withdrawals
  • Link to a range of checking accounts based on your preferences
  • Hold your funds in USD and convert with the network rate when you spend or withdraw
HSBC card prosHSBC card cons
✅ Spend globally anywhere Mastercard is accepted

✅ No HSBC ATM fee to pay

✅ Currency conversion uses the network exchange rate

✅ Huge global bank which is safe and familiar

❌ Maintenance fees may apply on the checking account you link your card to

❌ No foreign currency balance option

5 types of international transaction fees to know

Spending overseas or in foreign currencies with your debit or credit card can come with some extra fees compared to domestic use. Getting familiar with your card’s terms and conditions is the best way to make sure you don’t run into any surprise costs. Look out particularly for the following:

Foreign transaction fees: Where foreign transaction fees apply, they’re added to every transaction which is made using a foreign currency, in person and online. Foreign transaction fees can commonly be around 3%, but there are some alternative options including no-foreign transaction fee credit cards, and low cost travel cards from services like Wise and Revolut.

Currency conversion fees: When you spend in a foreign currency, the cost of your transaction needs to be converted back to USD to be billed to your account. The exchange rate used for this might be set by your card issuer, or bank, or by the merchant you’re spending with. You might find that the exchange rate includes a currency conversion fee, which is a percentage cost added for every transaction.

Dynamic currency conversion: Dynamic currency conversion is when you agree to pay in USD when you’re abroad. This can mean paying hidden fees and getting a poor exchange rate, as you hand control of the transaction to the merchant or ATM operator rather than your bank. While your bank will make some efforts to keep its customers happy, a foreign merchant is less likely to worry, which can mean extra costs creep in.

International POS fees: Some cards charge extra when you pay for things in stores overseas. This can be in the form of a foreign transaction fee which we touched on earlier, or could be an international POS fee – check your account fee schedule to make sure you’re clear on what your foreign currency spending will cost you.

International ATM fees: In addition to any foreign transaction fee that applies, you may also need to pay an international ATM fee when you make cash withdrawals abroad. This is likely to be a fixed fee from your bank – and the ATM operator might also add their own fixed fees here, too.

Conclusion: Is it better to pay in the local currency with a credit card abroad?

Overseas spending is cheaper if you use a low cost debit or credit card which skips the foreign transaction fee, and if you always pay in the local currency wherever you are. If you agree to pay in USD you may find that you get a poor exchange rate and end up paying extra fees too, as the merchant or ATM can choose how to process the transaction rather than your bank or card issuer.

  • Paying in the local currency is usually the cheapest option, whenever you travel
  • Choosing a debit or credit card with no foreign transaction fee can keep costs down
  • Some cards also have no overseas ATM charge which helps when cash is needed
  • Weigh up any other fees you may need to pay when using a card – such as an annual cost, or a foreign transaction fee – before you pick the one for you

Consider getting a low cost travel card from Wise or Revolut if you’re looking for a debit card for cheaper international spending. If you prefer to spend with a credit card, weigh up the options for products like Discover cards – which have no foreign transaction fees – or a card from a bank like Bank of America, which can waive the foreign transaction fee but will come with annual charges.

Go to WiseGo to Revolut

FAQs: Paying in local currency vs card currency

Should I pay in pesos or dollars with a credit card?

If you’re overseas you’ll want to pay with the local currency wherever you are – so if you’re on a trip to Mexico, spending in pesos makes sense. You might find that a merchant asks if you’d prefer to be billed in USD, but this is usually a more expensive option because of dynamic currency conversion.

Look out for credit cards which don’t have foreign transaction fees, pay in the local currency wherever you are, and clear down your card bills as quickly as possible to keep the costs down overall.

Is it better to pay in euros or dollars when traveling in Europe?

If you’re in the Eurozone, paying in euros is the best option. Bear in mind though, that there are actually lots of other currencies used in Europe, such as the British pound of the Polish zloty. Spend the local currency wherever you are to avoid unnecessary fees and poor exchange rates.

Claire Millard
Fintech Content Writer
Claire Millard is a content and copywriter with a specialty in international finance. Her work has featured in The Times and The Telegraph, as well as industry magazines and leading personal finance blogs.
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Seyma Mektepli
Seyma is an experienced content writer and editor-in-chief at Exiap, delivering informative articles on personal finance, and money transfers.
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Last updated
June 19th, 2024