I am planning a trip out of the country and it has been awhile since I looked in to how exchange rates are handled when using a credit card or ATM in a foreign country.
It was my understanding that credit card companies have to apply the best (for you) exchange rate for the month you are billed. However, in this day and age of computers for all I know they apply the rate at the moment of billing. Hopefully they do not apply the rate that is least favorable to you but I do not know.
Then there are ATMs. Do they apply an immediate rate? Do they charge higher ATM fees for being out of the country?
Because the bank is exchanging millions each day, they get to do it at a preferable exchange rate to the ‘tourist’ rate you get if you exchange cash over the counter, and calculate your bill for ATM withdrawls and card transactions according to this.
The difference between the rates at which they buy and sell cash will differ by only a fraction of a percent, whereas the tourist rates have a difference of several percent. So even if, say, they also apply a 2% charge added on to an overseas ATM transaction, it can still work out cheaper overall than changing cash.
I live in Colombia, S.A. and use the ATM each month to take money from my account at a Credit Union in the USA. I get the best rate as quoted officially less 1% for transfer fees. I have also used my credit card from the USA and received a lesser rate than the official rate. But, they are nearly equal.
When I honeymooned in Montreal, I used my Mastercard Checkcard quite a bit. The exchange rate between US and Canadian dollars varied with every purchase, but it was usually more equitable than cashing in traveller’s cheques or exchanging US bills.
The hard part was tracking my purchases via phone. (No handy on-line statements were available in 1996.) I’d get a purchase of, say, $35.16 USD reported. But my purchases that day were $48 Can and $52 Can, so I couldn’t tell which purchase had come through.
Some credit cards and ATMs charge a fee for the foreign currency conversion, but even so, it’s a better rate (much!) than you’ll get with either cash or travellers’ checks at a bank or kiosk.
The other side of the coin is not to worry about it too much. I mean, seriously, if you lose $2 on every $100 transaction because you cashed at a bank rather than using an ATM, it’s not the end of the world. Yeah, aggravating and annoying, but unless you’re changing thousands of dollars, the diff is small potatoes. I say this because, on our last trip, my wife was going nuts trying to find an ATM that wouldn’t charge an additional fee; I finally had to say, look, honey, we’re talking another $3 in cost. It’s not worth the hour’s time to find the ATM you want.
ATMs may charge a per-transaction fee, so your best strategy with an ATM card is to get a large amount of cash in the appropriate currency when you arrive. Most airports, train stations, and ferry terminals have ATMs in them these days.
Whack-a-Mole, there is hardly going to be a difference whether they account for it right away or wait a bit. Unless there is a HUGE economic meltdown any difference would be miniscule. Here’s what to do. Don’t worry about crap like that. You’re splitting hairs. If you can’t loosen up why even bother taking the trip? I mean if you are there worrying about whether or not you’re getting a maximized exchange on your credit card transaction how are you going to enjoy yourself.
I can see it now… You’re sitting in a foreign land and you charge a meal in a fine restaurant. Instead of savoring the food you’re worried if you got a 7.991 rate or a 7.992 rate. Likewise you buy tickets to an attraction or a museum and go in wondering same. You gotta let go, Wack a Mole.
Then you come home and a big part of the conversation is about the exchange rates on your credit cards. Nobody wants to hear that crap, my friend. They would rather be bored to death with a slide show. Believe me. I used to be like you. Then one day I just let go of it all and everything got better and I became more interesting to more people.
I travel internationally all the time for business and always use the ATM, instead of exchanging currency. The exchange rate is always competitive and much cheaper than the fees at various exchange places. It is even company policy now.