Better Exchange Rate: Credit Card or ATM?

I’ve spent a lot of time researching how Credit Card companies come up with their currency exchange rate (see my post on How Capital One calculates its exchange rate and my post on How Visa calculates its exchange rate).  Now that we know how the rates are determined, its time to decide if using the credit card is the best way to pay when traveling as a tourist.  In the past few months of travel I’ve experimented with different methods of currency exchange.  In today’s post, I’m comparing credit cards with ATMs.  Both exchanges took place on January 24th, 2014 at Geneva’s International Airport in Switzerland.

The ATM Transaction from UBS Bank:  Using my Charles Schwab Checking account (which reimburses me for all ATM fees), I took out 400 CHF (Swiss Francs) from the UBS ATM in Geneva (receipt below).   Also below is a screenshot from my online banking transactions that shows the converted amount was $446.34 USD.  The effective CHF to USD exchange rate was  1.11585.

The Credit Card Currency Exchange:  By now it should be clear that I am using a Capital One Visa credit card for all my foreign currency purchases.  This particular card has NO foreign transaction fee, and receives the exact rate that is published on Visa’s currency exchange website.  For this purchase, I bought a bottle of water for 4.oo CHF (I know, super expensive).  The receipt is below as well as a screen shot from the Capital One transactions webpage which shows I paid $4.49 in USD.  The effective CHF to USD exchange rate was  1.1225.

Comparing the Two Methods:  Unfortunately, the credit card transaction posted on January 25th even though it occurred on the 24th.  The ATM transaction was posted on the same day it occurred (the 24th), which means we won’t be able to compare the exchange rates apples to apples – but we can come close.  This is a an important thing to note – often the exchange rate used by the credit card is the rate from the day after the transaction.   This can be either good or bad depending on how the exchange rate changes in a day, but usually won’t result in a huge difference.   It is however, something to keep in mind if you are making a big purchase and really in tune with the global currency markets.

Below is a chart comparing the exchange rates on Friday January 24th.  Because we know my Capital One Credit Card will get its exchange rate from Visa’s corporate exchange rate website, we can easily tell what the exchange rate would have been if the credit card transaction was posted on the 24th instead of the 25th.   The ATM rate and Credit Card rates are different by 0.0001, which is basically nothing.   I threw in a few other bench marks to see how the exchange rates compare, but the take away here is that the ATM and Credit Card exchange rates are essentially the same.

Just for fun, I also made a chart for exchange rates on Saturday January 25th.  I don’t know what Schwab’s exchange rate would have been on January 25th, but I included the chart to point out a key point.  According to my credit card statement, the exchange rate was 1.225, however, on the Visa corporate website the rate was 1.1234.  As you see in the chart, this discrepancy makes no difference when looking at a 4.00 CHF purchase.  I explained why there is a difference between the rate you see on the statement and what you see on the corporate webpage in a previous post, I just didn’t want any one to be confused if they looked up the numbers themselves.

Final Thoughts: To answer the original question, it looks like using a credit card or ATM will give you the same good rate.  Okay, using my credit card would have saved 4 cents, but it is so small maybe that would have been different with another transaction on a different date.  One huge caveat though – if you get charged an ATM fee by your bank, then everything changes.  Or if you get charged a foreign transaction fee on your credit card – same thing.  So make sure you are with a good bank, otherwise worrying about this is useless!