They will also use the exchange rate when the transaction is processed, which may have changed since you actually made the purchase. So if you are travelling to a country with a currency that has been stable against stirling, you’ll be getting the best deal.Ĭredit card networks such as Visa and MasterCard that exchange your credit card spend into the local currency, will use their own exchange rates, not necessarily the 'actual' exchange rate their underlying banks are using. The more volatile the currency, the wider the spread. Some also add commission, but commission-free FX has become more common. If you exchange £100 into euros (buy euros) and then exchange those back to GBP (sell euros) you will have lost money because the buy and sell price will be different. This is never passed on to consumers, which is why you will see different exchange rates available from different suppliers.Īll currency exchangers (foreign exchange or FX traders) buy currency off you at one rate and sell it back to you at another. The 'perfect' exchange rate is the actual exchange rate banks use when transacting between themselves. If not, then just make sure you pay off your balance after you come back from your holiday and let the card sit in your wallet until the next time you spend in a foreign currency.Īlthough you save money by not paying any foreign transaction fees, you are still having your money exchanged by a third party, which is why this exchange rate is not exactly perfect. Many of the credit cards on the market that offer no foreign transaction fees do not come with any extra features other than this, so it's worth deciding whether or not you will use this card when you're not on holiday too. This means that Visa or MasterCard's exchange rates will be applied to convert your spending into the local currency, with no additional costs. Instead of being charged for every transaction on your credit card spent abroad or in a foreign currency, your payment will be converted to the local currency based on your credit card network’s exchange rate at the time of purchase. This means that using a credit card with no foreign transaction fees can be one of the cheapest ways of spending money in a foreign currency. Some credit cards have no foreign transaction fees, which means that the 2%-3% charge that is usually applicable on most debit and credit cards is waived. When on holiday, the fees can add up quickly if you are regularly spending on a credit card, so it's worth shopping around for a no foreign transaction fee credit card. If you are shopping online and see that the items in your basket are listed in a foreign currency, then it's highly likely that foreign transaction fees will be applicable. The foreign transaction fee does not only apply to purchases made in another country, but also to spending online in a foreign currency. The second charge, if applicable, will come from the credit card issuer, which adds up to a total fee of 2%-3% of the bill. Your credit card network (such as Visa or MasterCard) will add a charge for handling the transaction between the merchant and your credit card issuer (such as MBNA, NatWest, etc). Usually it's a combination of two charges from your credit card network and your credit card issuer. What is a foreign transaction fee?Ī foreign transaction fee isn't always just the one fee. Read our guide to find out how you can get a credit card with no foreign transaction fee. Most debit and credit cards come with foreign transaction fees averaging around 2%-3% of the cost of the goods or service you paid for.
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