Photo: M. Woodruff/Business Insider
While vacationing in Jamaica last year, I noticed almost everything in stores came with not one, but two price tags: one in Jamaican dollars and another converted into USD.This followed with everything, from restaurant menus and cab fare to admission rates for local beaches and vendors selling fruit.
I barely used Jamaican currency during my week-long stay, and to be honest, I thought I was getting off easy. Foreign transaction fees are no joke and I knew my bank would hit me with a withdrawal fee each time I took out cash from an ATM.
But I was doing more harm than good: Merchants love offering tourist-friendly exchange rates on their goods–-and jacking up the price in the process.
“Merchants tend to offer this supposed service in order to apply unfavorable exchange rates to your transaction and pocket some extra profit,” he says.
And it’s not like many tourists hopping on and off cruise ships for excursions will be toting around calculators to check up on merchants’ maths.
I was also dead wrong to assume I’d dodge that foreign transaction fee by paying the American rate. Credit card companies can still charge customers with foreign transaction fees, even if the transaction is in their native currency.
“The credit card company is simply charging the customer for a transaction made abroad, and not for the actual currency conversion,” CardHub explains.
Turns out what I’d been trying to avoid––using plastic––was might have actually been the best solution to saving on my spending abroad.
In CardHub’s latest currency exchange study, they found that using credit cards for overseas purchases saves travellers as much as 8.1 per cent compared to exchanging currency at bank branches and 16.2 per cent compared to exchange services at airports.
What’s more, foreign transaction fees have actually dropped slightly since 2011, with Visa and MasterCard offering the lowest rates at about 1.25 per cent. Some lenders have dropped the fees altogether (choose your travel cards wisely if this is the perk you’re after).
If you’re not on board with credit cards, pack your debit card instead. Withdrawal fees can be friendlier to your wallet than trusting merchants to do their own conversions. And it’s a lot safer than lugging around wads of cash.