Is It Best to Pay in Local Coin or US Dollars When You Travel?

Why You Should Always Pay in Local Currency (And Not USD) When Traveling

Here’s a simple mistake most travelers make when paying abroad and so did I: Whenever asked if I wanted to pay in local currency or US dollars, I chose US$, thinking I was making a smart decision. I was so wrong.

Whenever you are using your credit card outside your home country, never choose to pay US$ and always insist on paying in local currency. The reason merchants are eager to charge US$ is because they will charge you what's called a Dynamic Currency Conversion (DCC) fee.

A DCC fee is in addition to any other foreign transaction fees that your credit card may charge you, which is usually 2.5 to 3% (See the Pro Tip below). The DCC fee can be 1% of the total transaction, but that’s not all. Merchants will always use a bizarre currency exchange rate at the point of sale to their advantage.

Your credit card networks can always negotiate better exchange rates to your advantage, so if you are letting merchants do the exchange, you are losing big time. It has been proven that you can be paying 7 to 12% more in total if you let merchants do the conversions.

So whenever you are traveling, always pay in local currency and if you are not told, ask the merchants how they are putting the transaction through.

Pro Tip: Always use a No Foreign Currency Transaction Fee credit card. Many of the so-called best travel credit card promoters are trying to sign you up to get charged a foreign currency fee (usually 1-3%). So always make sure the credit cards you are traveling with have zero foreign currency fees.