If you’re traveling outside the United States, it’s a good idea to bring some local currency — along with a credit card since you don’t want to carry too much cash. However, credit card transactions abroad have the potential to cost extra, depending on the card you use and how you decide to pay.
“When traveling abroad, there is simply no reason to pay foreign transaction fees when using your credit card,” says Dave Grossman, credit card expert and founder of YourBestCreditCards.com.
But many do, he adds, because either the credit card charges a foreign transaction fee or because the customer chooses to pay in U.S. dollars. But paying abroad in USD is generally not the best move since it triggers what’s called a dynamic currency conversion, or DCC, fee. In order to keep your costs as low as possible, here’s what you need to know.
Why Pay in Foreign Currency?
When you’re traveling in Europe and decide to hand over your card to pay, don’t be surprised if the credit card reader or merchant presents you with a choice to pay in USD or euros. If it’s on the machine, you may be required to make your selection by tapping a button, or you might have to answer verbally.
It’s natural to want to know how much something costs in USD since that’s the currency you’re familiar with. “What is not disclosed is the foreign currency conversion fee they will apply, which could be 3% or more,” says Grossman.
[Read: Credit Cards With No Foreign Transaction Fee]
Consumers that choose DCC usually don’t realize they’re paying a fee for convenience and clarity in pricing, agrees Adem Selita, CEO and co-founder at The Debt Relief Company. ” I don’t think it’s worth the trade-off.”
Another misconception is that switching to USD could avoid a foreign transaction fee (if your card has one), but that is also not the case. “If you have a card that does charge foreign transaction fees, if you elect to pay in USD you will be charged that DCC fee at the shop and still pay your bank their foreign transaction fee,” says Grossman. “That fee is charged for making the purchase abroad – not because it’s actually in another currency.”
In that case, Grossman adds, you’ll get hit with a “double whammy,” which could be 5% or more.
[Read: Best Credit Cards]
How to Avoid DCC
There may be cases in which a merchant might initiate or default to a DCC without telling you, even though they are technically required to disclose your options. For instance, Mastercard’s merchant standards state, “If the cardholder does not explicitly choose to have the transaction completed in their billing currency, it must be processed in the local currency. DCC must not be selected in the cardholder’s absence.” Visa’s merchant requirements are similar.
So what can you do to combat shady sellers who may try to take advantage of unsuspecting tourists? Pay attention at checkout, says Selita. “It’s something you should always try to proactively bring up when you are paying to make sure you don’t pay the extra charges.”
Grossmann says that’s exactly what he does. “Some shopkeepers will be quick to try and hit that USD button for you, so I personally always say right up front I want to pay in the local currency.”
Other Ways to Save on Credit Card Transactions Abroad
Avoiding DCC fees is easy once you get used to advocating for yourself at the checkout counter. Another proactive way to pay less when shopping abroad is to bring the right credit card along. “Every international traveler should have at least one credit card without foreign transaction fees,” says Grossman.
The good news is that many popular travel credit cards, and even some issuers such as Capital One and Discover, do not charge foreign transaction fees.
In addition to when shopping abroad, pay special attention when you are making payments at international hotel chains. “I have been in rare circumstances where I was quoted a rate in USD, then the hotel converted it to local currency, and then converted it back to USD on my final bill,” Grossman says. “To the extent possible, always be clear you want to pay the quoted rate in the local currency. On a hotel bill, you might just save yourself a few hundred dollars or more by checking out armed with this knowledge.”
More from U.S. News
Dear Clever Credit: I Travel a Lot for Work. What Credit Card Should I Use?
Clever Credit: I Graduated From College. What Should Be My Next Credit Card?
Dear Clever Credit: I’m Retired. What Credit Card Will Boost My Travel Rewards?
Should You Pay in U.S. Dollars With Your Credit Card When Traveling Abroad? originally appeared on usnews.com
Update 05/04/26: This story was previously published at an earlier date and has been updated with new information.