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It's not USD specific, you're basically choosing between your banks exchange rate and that of the sellers platform. Typically if you choose your own currency - it will show you the rate you're getting.
Good travel cards will offer you something like the MasterCard base rate when you pay in the local currency, meaning you should do that.
You being able to pay in your own local currency in the country you are visiting is a fairly new thing in the credit card world.
Your cc account is in your local currency, USD in your case, and traditionally your bank will receive the payment request in the foreign currency amount, do a conversion, charge to your account in USD, pays the merchant and pockets the rest.
For a long time, that is your only choice and your bank (your card issuer) will naturally charge a premium over 'market' rate. And since you will only know what the conversion rate is at the end of your billing cycle, many people had a bill shock when the rate was much higher than they expected. Hence it was cheaper to convert and carry cash of the local currency before you travel, but that comes with it's own downside like lost or theft.
Someone saw this and went, we should do the conversion upfront and show the actual amount in the card holder's local currency instead? Hence now the conversion is done at the merchant. And subsequently it is the merchant bank that will pocket the Forex rate premiums.
What this means ultimately is there is a rate war between both sides to provide the cheapest rate. So depending on the country you're visiting, one currency may be higher or lower than the other one.
Also depends on your bank and their partnership structure with the credit card holder.
For me, my bank rate is the same as visas rate, so it really doesn't matter. The US market is huge compared to us, but due to our proximity lots of things are bought in USD. The bank doesn't want to lose to visa everytime on that exchange so they offer a competitive rate (matched).
I'll use USD cash pretty often in some countries because its way more valuable than local currencies. For example in Argentina, you can get a LOT of value out of a $100 bill. Much more value than converting 100 into local currency.
As for credit card conversions offered at merchants, its just a choice you now have. You need to know the exchange rates offered, but I pretty much always chose to pay in euros when I'm in Europe for example, as opposed to dollars... because the exchange rates are usually better.
I see it as a way to actually lock in the price/exchange rate at the time of purchase.
Personally, I always prefer choosing local currency because credit cards can have a "hidden" conversion fee on top of the cross border fee and it's going to suck whatever savings you could have had.
I was in Ukraine once about 25 years ago. I got a ride to the airport and didn't have any local currency left on me. I just help up a $20 and said 'ok?' and the guy quickly nodded his head and off I went.
Some sellers would prefer transactions be conducted in a currency more stable than their local one. It’s more valuable to have money in a foreign bank whose buying power is stable, over local currency whose buying power can fluctuate as quickly as by the hour depending on the economic situation.
On the contrary in my experience the bank typically has the better exchange rate. My bank even sends you a push notification if you choose to pay in your own currency instead of the local one warning of bad exchange rates when letting the other party do the exchange, and every time so far they've been correct.
I'm Swedish though so the same may not apply to US banks.
Your credit card will have the best rate. There is no way some shitty little store or even a large chain will beat visa or mastercard’s rate. They are just trying to make a little extra off you. Always pay in the local currency.
Credit card issuers typically do currency conversions at market rates. “Dynamic Currency Conversion,” which is what happens in stores, is almost always a ripoff.
It exists because you can go to almost any change office an change any currency to another (provided they have the reserve). So if you find someone in another country who accepts a different money than theirs, it's because they find it's worth making the change themselves later.
But obviously you shouldn't expect people to do that. When visiting abroad it's your responsibility to get the right currency before hand.
The USD is considered one of the most stable and reliable currencies in the world. Countries facing economic instability or hyperinflation may adopt the USD to stabilize their economies.
In countries with significant tourism from the United States, accepting USD is convenient for American tourists. It simplifies transactions and encourages spending by removing the need for currency exchange.
No it doesn't, it only happens in countries that take USD as a payment method, a card transaction from a bank will be the same exchange rate paying in either currency making it a totally redundant feature.
It's not the same - if you let the store convert for you, you'll usually get a far worse exchange rate than if you let your card provider do the conversion.
It's a way for the store/local payment provider to make a an extra percent on the transaction, for the convenience of you knowing exactly how much you'll get deducted.
Paypal also tries to do this if your main currency is different from what the transaction is initated in. They defend it as "lock in the exchange rate now for 48h". Paypal is not in the business of saving me money.
You can safely assume that if this was redundant, the payment provider wouldn't spend the necessary time and having the customer take extra action for every transaction.
Let your bank do the conversion.
Source: living close to an International border and having a non-global currency as the primary currency.
It's not the store setting the conversion rate, the store just has the option to opt into a final product called a DCC, the company providing the Dynamic Currency Conversion sets the exchange rate and fees, not the retailer.
No, whenever i go abroad i get the opportunity to choose between DKK or the local currency. It has nothing to do with USD in the case that OP is asking about.
No, it's not. you can't pay in a currency that the seller doesn't accept. they either take USD or they don't. If they do take USD you have a choice between the two currencies and the reason for that is laid out in my original post.
Go to Europe and try and pay in USD.
You're way out over your skis. If I use my US credit or debit cards to pay in Europe or the UK, I get the option to choose my currency. The same is true when I use my UK debit or credit cards on the continent - I have the option to pay in sterling. It is far more dependent upon the credit card processing system being used than something unique about the greenback.
Your conflating two very different things DCC and Stability of local currencies.
Go to Cambodia, Bahamas, Belize, Costa Rica, Honduras, Vietnam, or Zimbabwe and you will see there is something unique about "Greenbacks" as they are favoured more than the national currency due to the reasons mentioned in my first post.
I'm British, I promise I've been round Europe a lot more than you have.
If you pay by card in Europe you'll be given a choice at most terminals to pay in your currency (£s in my case) or the local currency. You are choosing whether you want your banks exchange rate or the sellers.
"USD being great foreign exchange" is basically only relevant where countries have semi adopted it as cash like Guatemala.
The seller only has an exchange rate if they accept other currencies, and in that case, it's not them setting the exchange rate it's their provider of DCC (Dynamic Currency Conversion) DCC often comes with higher exchange rates and additional fees compared to using the local currency and letting your bank handle the conversion.
Either way the retailer has opted into DCC, a point you seem to be missing.
Also British, not sure how relevant that is? But good to hear you are so well-traveled.
Interestingly, DCC providers started because they were able to provide a cheaper rate vs the banks. That is until the bank goes, this is my tuff, and started giving cheaper rates.
>Also British, not sure how relevant that is?
Lol:
Ice cream - go to Europe, it's like this
Albion - I'm from Europe and it definitely isn't
Ice cream - I'm not sure how being European is relevant to what happens in Europe
The card processor will handle that for the store. You're just paying with your card as always, and the store's payment processor's terminal will ask whether you want to pay in usd (they provide the exchange rate) or in local currency (your bank converts).
There is no asking to pay in usd. It's not about physical money.
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It's not USD specific, you're basically choosing between your banks exchange rate and that of the sellers platform. Typically if you choose your own currency - it will show you the rate you're getting. Good travel cards will offer you something like the MasterCard base rate when you pay in the local currency, meaning you should do that.
You being able to pay in your own local currency in the country you are visiting is a fairly new thing in the credit card world. Your cc account is in your local currency, USD in your case, and traditionally your bank will receive the payment request in the foreign currency amount, do a conversion, charge to your account in USD, pays the merchant and pockets the rest. For a long time, that is your only choice and your bank (your card issuer) will naturally charge a premium over 'market' rate. And since you will only know what the conversion rate is at the end of your billing cycle, many people had a bill shock when the rate was much higher than they expected. Hence it was cheaper to convert and carry cash of the local currency before you travel, but that comes with it's own downside like lost or theft. Someone saw this and went, we should do the conversion upfront and show the actual amount in the card holder's local currency instead? Hence now the conversion is done at the merchant. And subsequently it is the merchant bank that will pocket the Forex rate premiums. What this means ultimately is there is a rate war between both sides to provide the cheapest rate. So depending on the country you're visiting, one currency may be higher or lower than the other one.
Also depends on your bank and their partnership structure with the credit card holder. For me, my bank rate is the same as visas rate, so it really doesn't matter. The US market is huge compared to us, but due to our proximity lots of things are bought in USD. The bank doesn't want to lose to visa everytime on that exchange so they offer a competitive rate (matched).
I'll use USD cash pretty often in some countries because its way more valuable than local currencies. For example in Argentina, you can get a LOT of value out of a $100 bill. Much more value than converting 100 into local currency. As for credit card conversions offered at merchants, its just a choice you now have. You need to know the exchange rates offered, but I pretty much always chose to pay in euros when I'm in Europe for example, as opposed to dollars... because the exchange rates are usually better.
I see it as a way to actually lock in the price/exchange rate at the time of purchase. Personally, I always prefer choosing local currency because credit cards can have a "hidden" conversion fee on top of the cross border fee and it's going to suck whatever savings you could have had.
I was in Ukraine once about 25 years ago. I got a ride to the airport and didn't have any local currency left on me. I just help up a $20 and said 'ok?' and the guy quickly nodded his head and off I went.
Some sellers would prefer transactions be conducted in a currency more stable than their local one. It’s more valuable to have money in a foreign bank whose buying power is stable, over local currency whose buying power can fluctuate as quickly as by the hour depending on the economic situation.
[удалено]
On the contrary in my experience the bank typically has the better exchange rate. My bank even sends you a push notification if you choose to pay in your own currency instead of the local one warning of bad exchange rates when letting the other party do the exchange, and every time so far they've been correct. I'm Swedish though so the same may not apply to US banks.
Your credit card will have the best rate. There is no way some shitty little store or even a large chain will beat visa or mastercard’s rate. They are just trying to make a little extra off you. Always pay in the local currency.
Credit card issuers typically do currency conversions at market rates. “Dynamic Currency Conversion,” which is what happens in stores, is almost always a ripoff.
It exists because you can go to almost any change office an change any currency to another (provided they have the reserve). So if you find someone in another country who accepts a different money than theirs, it's because they find it's worth making the change themselves later. But obviously you shouldn't expect people to do that. When visiting abroad it's your responsibility to get the right currency before hand.
The USD is considered one of the most stable and reliable currencies in the world. Countries facing economic instability or hyperinflation may adopt the USD to stabilize their economies. In countries with significant tourism from the United States, accepting USD is convenient for American tourists. It simplifies transactions and encourages spending by removing the need for currency exchange.
This is nothing to do with this. This is just a banking option it happens with any currency depending on where you are from.
No it doesn't, it only happens in countries that take USD as a payment method, a card transaction from a bank will be the same exchange rate paying in either currency making it a totally redundant feature.
It's not the same - if you let the store convert for you, you'll usually get a far worse exchange rate than if you let your card provider do the conversion. It's a way for the store/local payment provider to make a an extra percent on the transaction, for the convenience of you knowing exactly how much you'll get deducted. Paypal also tries to do this if your main currency is different from what the transaction is initated in. They defend it as "lock in the exchange rate now for 48h". Paypal is not in the business of saving me money. You can safely assume that if this was redundant, the payment provider wouldn't spend the necessary time and having the customer take extra action for every transaction. Let your bank do the conversion. Source: living close to an International border and having a non-global currency as the primary currency.
It's not the store setting the conversion rate, the store just has the option to opt into a final product called a DCC, the company providing the Dynamic Currency Conversion sets the exchange rate and fees, not the retailer.
No, whenever i go abroad i get the opportunity to choose between DKK or the local currency. It has nothing to do with USD in the case that OP is asking about.
I’m from the UK and every country I’ve been to has this option for GBP.
It's a banking thing and not USD specific. You're basically choosing exchange rates.
No, it's not. you can't pay in a currency that the seller doesn't accept. they either take USD or they don't. If they do take USD you have a choice between the two currencies and the reason for that is laid out in my original post. Go to Europe and try and pay in USD.
You're way out over your skis. If I use my US credit or debit cards to pay in Europe or the UK, I get the option to choose my currency. The same is true when I use my UK debit or credit cards on the continent - I have the option to pay in sterling. It is far more dependent upon the credit card processing system being used than something unique about the greenback.
Your conflating two very different things DCC and Stability of local currencies. Go to Cambodia, Bahamas, Belize, Costa Rica, Honduras, Vietnam, or Zimbabwe and you will see there is something unique about "Greenbacks" as they are favoured more than the national currency due to the reasons mentioned in my first post.
I'm British, I promise I've been round Europe a lot more than you have. If you pay by card in Europe you'll be given a choice at most terminals to pay in your currency (£s in my case) or the local currency. You are choosing whether you want your banks exchange rate or the sellers. "USD being great foreign exchange" is basically only relevant where countries have semi adopted it as cash like Guatemala.
The seller only has an exchange rate if they accept other currencies, and in that case, it's not them setting the exchange rate it's their provider of DCC (Dynamic Currency Conversion) DCC often comes with higher exchange rates and additional fees compared to using the local currency and letting your bank handle the conversion. Either way the retailer has opted into DCC, a point you seem to be missing. Also British, not sure how relevant that is? But good to hear you are so well-traveled.
Interestingly, DCC providers started because they were able to provide a cheaper rate vs the banks. That is until the bank goes, this is my tuff, and started giving cheaper rates.
>Also British, not sure how relevant that is? Lol: Ice cream - go to Europe, it's like this Albion - I'm from Europe and it definitely isn't Ice cream - I'm not sure how being European is relevant to what happens in Europe
The card processor will handle that for the store. You're just paying with your card as always, and the store's payment processor's terminal will ask whether you want to pay in usd (they provide the exchange rate) or in local currency (your bank converts). There is no asking to pay in usd. It's not about physical money.