Exchanging currency is necessary for most trips outside the United States, and consumers have a number of options when it comes to converting U.S. dollars into the currency used in a particular destination. The two main ways to do so are: 1) automatically with a credit card; and 2) converting hard currency at a bank or airport kiosk. But which offers the best deal?
This might seem like less of a concern in light of the dollar’s current strength relative to other currencies, but that’s just a flawed assumption. You have to look at things in percentage terms – paying 20% interest is expensive, while a 10% investment return is fantastic, for example – as well as at the overall dollars and cents. Saving 15% on a weeklong European vacation, which runs the average family of four around $4,000, will equate to an extra $600 in your pocket. That’s the equivalent of staying an extra night, or perhaps even opting to fly first class.
So, in order to help international travelers minimize costs, CardHub surveyed the nation’s largest consumer banks as well as the world’s two largest card networks (Visa and MasterCard) and the country’s largest currency exchange service (Travelex at New York City’s John F. Kennedy Airport). Both for uniformity’s sake and because the Euro is the most prevalent foreign currency, we gathered information about the U.S. Dollar-to-Euro exchange rate as of May 8, 2015. In other words, we determined the dollar amount needed to buy one Euro from each of the companies polled.
Note: All of the above numbers are averages and the credit / debit card metric assumes a no foreign fee card.
- The cheapest way to convert currency is to do so automatically with a no foreign transaction fee credit card on the Visa or MasterCard network. The average bank and Travelex location charge 5.88% and 9.05% more, respectively. Using a no foreign fee debit card is recommended for cash withdrawals for the same reason.
- While the cost differential between major card networks and the financial institutions that provide hard currency conversion services remains substantial, it has declined 27% for banks and 44% for Travelex since 2012.
- Based on our survey, the two institutions with the worst currency conversion deals are Fifth Third Bank and First Tech Credit Union – both of which are at least 9% more expensive than using a credit card.
- CardHub surveyed 35 of the 50 largest credit unions, and only four offer currency conversion services: State Employees Credit Union, First Tech Federal Credit Union, Citizens Equity First Credit Union and ESL Federal Credit Union.
- On average, the cost of currency conversion varies little between banks and credit unions, with the latter being 0.19% less expensive.
- Consumers receive 22.39% more euros per dollar this year relative to 2014, thanks to the dollar’s recent strength.
- While the overall cost of converting currency at a national bank has decreased 13% on average relative to last year and Travelex has also seen an 11% price drop, credit unions are now charging 10% more than in 2014.
|2015 Exchange Rate for 1 Euro||2015 Fee||% Higher Than Best Option|
|Credit Union Avg.||$1.1787||$6.25||3.90%|
|2015 Exchange Rate for 1 Euro||2015 Fee||% Higher Than Credit Card / Debit Card*|
|Bank of America||$1.1818||$0||3.94%|
|Fifth Third Bank||$1.2120||$10**||9.46%|
|BMO Harris Bank||$1.1551||$10||5.00%|
|State Employees Credit Union||$1.1430||$0||0.68%|
|ESL Federal Credit Union||$1.1766||$0||3.52%|
|First Tech Federal Credit Union||$1.1990||$15||10.06%|
|Citizens Equity First Credit Union||$1.1962||$10||8.26%|
**$10 is waived when more than $300 is exchanged
Note: 2014 was the first year that Credit Union data was collected.
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The credit cards and checking accounts below were chosen by CardHub’s editors not only because they lack foreign transaction fees, but also because they excel in various popular usage categories – including rewards, no fee accounts and 0% introductory interest rates.
Barclaycard Arrival Plus
|Rewards: This card offers a $400 travel credit to those who spend at least $3K in the first three months. You also get the miles-equivalent of 2% cash back across all purchases and a 10% miles redemption rebate.|
Capital One Quicksilver Cash Rewards
|No Annual Fee: In addition to having no annual fee, this card gives you 1.5% cash back across all purchases.|
Capital One Platinum Prestige
|0% APR: You get 0% on purchases for the first 14 months you have this card, which does not charge an annual fee.|
Joruney Student Rewards
|Student: Students who pay their bill in full each month get 1.25% cash back across all purchases with this card, which does not charge an annual fee and is thus perfect for cost-effective credit building.|
Capital One Spark Cash
|Small Business: A great option for everyday business spending, this card provides small business owners with 2% cash back across all purchases as well as a $250 initial bonus for spending $5K in the first three months.|
|Checking Accounts / Debit Cards||Offer|
Charles Schwab High Yield Investor Checking
|Low Cost: This account does not charge a monthly fee and refunds all ATM owner surcharges you may incur.|
BankPlus Personal Checking
|Low Cost Runner Up: This account’s $7 monthly fee can be avoided with a minimum balance of $500, and users will receive an ATM fee rebate.|
1. Use a no foreign transaction fee credit card for the majority of international spending (this includes purchases made through foreign-based companies while still in the United States)
It’s common for international travelers, especially first-timers, not to feel ready to leave until they’ve got some of the hard currency used in their destination country. It’s just one of those things that’s traditionally been recommended.
But with the banking system becoming increasingly digital, it makes sense for the easiest way to buy things in a foreign currency to be with plastic. Why waste the time exchanging physical currency and risk carrying it around when a credit card handles the process automatically and gives the best possible exchange rates in the process? You’re going to save relative to a bank or airport kiosk exchange no matter what card you use, but getting a credit card with no foreign fees is an easy way to reduce costs even more. Just remember to get such a card before booking anything through a foreign-based company because if the transaction gets processed outside of the U.S., it will trigger a foreign surcharge.
2. Bring a debit card with low international ATM withdrawal fees as well
You’re going to need cash at some point in your trip – whether it’s for a cab, tipping a bellboy, or something else entirely. The best way to accommodate that need is to bring a Visa or MasterCard debit card, as long as it doesn’t charge too much for international ATM withdrawals. This will enable you to not only get the same low exchange rate as with your credit card, but you’ll also be able to take out cash as needed and reduce the damage a pickpocket could do.
3. Notify your bank of your travel plans
Banks will suspend your credit and debit cards due to suspicions of fraud if you do not alert them to the fact that you’re traveling out of the country. This might actually be a good idea even if you’re traveling domestically because banks have been known to suspend accounts that display transactions outside one’s normal geographic area.
4. Get the phone number to call your bank collect
If your card gets lost or stolen, being able to contact your bank will not only help nip any potential fraud in the bud, but most banks will also overnight you a new card. The bank will pay for the call too, so you needn’t worry about international charges.
5. Steer clear of dynamic currency conversion
If a merchant offers to convert your purchase total from the native currency to U.S. dollars, they might be trying to help you out. Or they could be looking for an excuse to apply a high exchange rate and squeeze a bit more money out of you. It’s best not to find out, especially when you can use your phone or a small pocket calculator to make quick conversions and better understand how much things cost.