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Foreign exchange 101 update: Plastic charges


Last week, I updated my earlier report on the costs of using plastic, cash, and traveler’s checks when you travel outside the U.S. My conclusions: Plastic is still the best, but some plastic is better than others. This week’s tables show the fees and charges some of the larger banks add to foreign transactions on their credit and debit (ATM) cards.

These tabulations remain a work in progress and I’m continuing to add additional banks as I receive information from them. Even among listed banks, charges are in constant flux.

In addition to my own investigations, I recently reviewed a report from, a website that provides extensive credit card data and comparisons. Our findings generally agree, and I include some data from in the updated tabulation.

As before, I would like to hear from readers who have either corrections or information on other banks’ policies. I’d also like to hear from any banks with corrections or information to share with’s readers.

Credit cards

Last week’s report covered the basics of how the international MasterCard and Visa networks convert foreign charges. For this “service” they add a fee of one percent, which they charge to your bank (not your account). If it were the only cost, that one percent fee would be fine. It’s much less than you lose exchanging currencies any other way.

What’s not fine is that most banks tack on surcharges of their own—these days, typically two percent—to any charges that originate outside the U.S. That surcharge is a pure gouge. Your bank does nothing differently when it processes purchases in the U.S. It adds the two percent out of pure greed—and because it can. Moreover, most banks add their foreign surcharges to charges made outside the U.S. even when they originate in U.S. dollars.

Fortunately, a few banks do not add a surcharge. My first table tells the story for some of the leading card-issuing banks, as well as American Express:

Card issuer Total foreign surcharge
American Express 2%
Bank of America 3%
Barclay’s/Juniper 2 to 3%
Capital One 0%
Citibank 3%
Diners Club 3% (a)
HSBC 1 to 3%
JP Morgan Chase 3 to 3 1/2%
Pulaski 2%
US Bank 3%
Washington Mutual 1%
Wells Fargo 3%

Last week, I also noted the fairly recent development of “dynamic conversion,” where some local merchants convert your bill to U.S. dollars at the time of the purchase. The catch here is that nobody requires local merchants to use fair exchange rates. Merchants are free to use whatever phony rate they choose. The result is an obvious double markup. You pay both the merchant’s currency markup and the bank’s surcharge. If the merchant uses an exchange rate that is, for example, five percent below the wholesale rate, your exchange cost could total eight percent—five percent for the merchant plus three percent for the bank, an obvious gouge. Clearly, you should never accept dynamic conversion.

Debit (ATM) cards

When you use your debit card to get local currency at an ATM outside the U.S., the international networks immediately calculate the exchange and debit your account in dollars. Until recently, the only extra charge you paid was a flat fee—usually $3—for each withdrawal, regardless of the amount of money you received. Lately, however, some big banks have either (1) hiked the fee to $5, (2) added a conversion surcharge, or both. My second table shows data for a few of the largest banks:

Bank Cost per transaction Exchange surcharge
Bank of America (a) $0 1%
Bank of America $5 3%
Citibank (b) $0 1%
Citibank $1.50 1%
JP Morgan Chase $0-$3 (c) 0%
Wachovia $0-$2 (c) 1%
Washington Mutual $3 1%
Wells Fargo $5 0%

(a) At ATMs owned by members of Global ATM Alliance
(b) At ATMS in overseas CITI branches
(c) Varies by type of account

The table shows three ways to avoid a surcharge of more than one percent:

  • If you have (or open) an account with Citi, you can withdraw foreign currencies from ATMs at Citi branches outside the U.S. with no transaction fee. Citi has branches in dozens of foreign countries. In some, it has retail branches throughout the country; in others, it has only one or two offices in one or two major cities. You can easily find out whether a Citi account will work for your trip by checking the worldwide branch locator on Citi’s website (
  • If you have (or open) an account with Bank of America, you can withdraw foreign currencies from ATMs owned by member banks of the “Global ATM Alliance” with no transaction fee: Scotia Bank in Canada, Barclay’s Bank in the UK, Deutsche Bank in Germany, Paribas in France, and Westpac in Australia. All five have branches throughout their home countries. In other countries, however, Bank of America charges more than most other banks.
  • Many smaller banks—or bigger banks with elite-status accounts for some favored customers—add no fee of their own and agree to refund any fees that other banks apply, usually with a limit on the number of withdrawals per month.

Obviously, the spread between the best and worst deals on debit-card withdrawals is much wider than the spread among credit cards. The very best deals, such as Citi and the Global ATM Alliance, are as good as the best credit cards, while with the worst deals, you lose more than when you exchange currency or travelers checks.

Whatever you do, use a debit card for local currency from an ATM, not a credit card. When you use a credit card to get cash, you’re on the hook for a number of extra fees and charges.

When you travel

My overall recommendations remain the same as they’ve been for several years. To minimize your exchange losses:

  • Put big charges on credit cards. If you travel outside the U.S. a lot, consider getting a Capital One card, with its zero surcharge (and a reasonably generous reward program). Otherwise, AmEx, with its two percent surcharge, is a pretty good deal, and even cards with a full three percent surcharge are still an efficient way to pay outside the U.S.
  • Use your debit (ATM) card for whatever local currency you need. If your itineraries permit, use one of the limited no-fee systems. Otherwise, minimize your losses by withdrawing in fairly large amounts each time. Avoid using Bank of America in countries where you can’t find Global ATM Alliance ATMs.
  • Avoid dynamic conversion, which can more than double your losses and provides no counterbalancing advantages.

In short, keep using plastic, but make sure it’s the right plastic.

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