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When it comes to credit cards APR matters

With Credit Cards APR Is One Thing But Fees Are Just As Important

by / 0 Comments / Mar 04, 2015

You know that with credit cards APRis important. But you’ve become a savvy international traveler. You’ve done your homework, and also know that using a credit card with no foreign transaction fees is the way to go when making your purchases abroad. It’s that’s simple. Or is it? Even though you will save on fees for currency conversion, you still have to think about the exchange rate you will get for your money. Does choosing one credit card system over another make much of a difference in the value you get for your dollars? And what about those times when a merchant offers you the choice to pay in your local currency? Should you take their offer?

Here is some important information you need to know about the way credit card companies, banks, and merchants work when it comes to converting your hard-earned bucks in another country. With overseas credit cards APR is less important than FTFs.


Visa as a credit card company does not issue its own cards, but rather works with financial institutions that provide Visa-branded products to consumers and businesses. As such, it means that with credit cards APRis determined by the bank. It is also often your issuing bank that will determine the daily exchange rate for your specific country of travel. According to Visa’s web page, the company still calculates its own rate using wholesale markets or government rates. It then shares this suggested rate for the following day with its financial partners. Banks will adjust the rate depending on currency conversion fees and other factors. So on any given day, banks like Capital One, Chase, and Bank of America will all have a variety of currency exchange rates.

Benjamin Franklin said that a penny saved is a penny earned. So when you ask how tomake money on credit card purchases part of the answer is to save money by not paying FTFs or interest. When you choose credit cards APR is just one thing to compare – look at transaction fees as well.

One tool that might help you is an exchange rate calculator that Visa offers on its web site. The calculator allows you to compare your dollar with more than 150 currencies, and is also useful because it includes a field where you can add any bank fees to enable an accurate estimate.

To use the calculator, visit:

Exchange Rate Calculator


Users of MasterCard will find a similar system for currency exchange rates. Like Visa, the company uses many market sources to determine its exchange rates. MasterCard’s web site provides you with a currency conversion tool where you can set your base currency, although its selection of more than 40 foreign currencies is not as comprehensive as the Visa calculator. The tool will then give you a chart with calculated rates for these 40+ currencies. You can even print up this chart as a PDF. Unfortunately, these rates do no reflect any markups by issuing banks, and the shelf life of the chart is pretty short, given that exchange rates fluctuate daily.

To try out the currency conversion tool, visit:

Currency Conversion Tool

It’s important to also note that an exchange rate is not necessarily applied on the same date a transaction takes place. Merchants process your purchases at different times, so you will likely be charged a different rate (for better or worse) once your transaction is posted to the Visa or MasterCard system. MasterCard identifies this different day as the “settlement date,” so keep this in mind when using any currency conversion tool.
Another issue to keep in mind is that credit cards like MasterCard do not supply the exchange rate if a merchant converts the currency for you at a point of sale. This system is called Dynamic Currency Conversion. You should keep your eyes out for these situations.

What is Dynamic Currency Conversion?

Dynamic Currency Conversion is a method in which a merchant converts the cost of your transaction back to your local currency. DCCs take place at many points of sale. There are both pros and cons to this method. On the surface, it may seem convenient to you, because as a cardholder you can immediately view and understand how much an item will cost in dollars. But convenience can be expensive. The exchange rate is essentially at the discretion of the merchant, so DCCs lend themselves to higher markups. You are more likely to find a favorable exchange rate through your credit card company than through a DCC. Many travel experts advise against using this system if you can.

With Credit Cards APRis not all that Matters

Here are some guidelines to finding the best conversion rates:

So what are the best bank credit cards to look out for if you want to get the most value for your money? It’s a complex answer: with so many banks, currencies, and world economic events, you’ll have to do a little digging to find the situation that best serves you. But with an understanding of some key trends, you can get a jump start on the effort.

In a 2014 Currency Exchange Study by cardhub.com, researchers analyzed exchanges rates for the Euro as of May 2014. Capital One placed first for the best rate, listed as $1.4341. This data matches anecdotal evidence for Capital One, which is often mentioned as a good choice by credit card bloggers and forum posters. Capital One Visa products with no foreign transaction fees include the Capital One Venture Rewards and VentureOne Rewards credit cards. Also placing high on the study’s list of good Euro exchange rates was Bank of America at $1.4692. If you are interested in doing business with Bank of America, the bank offers a BankAmericard Travel Rewards credit card, which is also a Visa Signature product that carries no foreign transaction fees.

So in a nutshell, while one credit card network may have slightly better rates, you need to consider the exchange practices of your issuing bank. Regardless, you will still save big compared to Dynamic Currency Conversion, or to the corner kiosk that will buy your dollars for a lower-value price.

About the Author

D. Medina is a freelance journalist and expatriate from the United States currently living in Germany. She uses credit cards with no foreign transaction fees on a regular basis, not only in her daily life but when she travels as well. She has used no foreign transaction fee credit cards in countries as diverse as Italy, Singapore, Thailand, and Spain.

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