Tip 11: Never pay in your home currency

Now that we often use credit cards to pay for purchases when traveling you should be aware of exchange rates. When paying with your card the machine or teller may ask you whether you want to pay in the local currency or your home currency. Even though it may seem smart to pay in your home currency to see how much you spent right away, don’t.

When you pay with your card, your card’s network processes it using a rate that’s close to the current market rate and sends the final figure to your issuer. Visa and MasterCard say they give consumers “wholesale currency market” or “government-mandated” rates that are set either the day before or on the day the transaction is processed. If you opt for the conversion into your home currency when making a purchase, referred to as Dynamic Currency Conversion (DCC), the merchant’s rate is used instead of the credit card’s rate and it is rarely as favorable.

You should also note that credit card conversion rates are always better than what you get at a bank or a currency exchange shop or if you’re changing at the airport. So, I recommend using your card whenever possible and only carrying cash for small purchases or possible situations where a card may not be accepted.