Better Exchange Rate: Credit Card or ATM or Hotel?

This is a follow up to my last post (Better Exchange Rate: Credit Card or ATM?).  In this post I provide another example comparing Credit Card and ATM exchange rates and add one more exchange rate comparison – a Hotel front desk.

The transactions took place in Mauritius where the local currency is the Mauritian Rupee, or MUR.  All transactions occurred on September 14th, 2013.  I haven’t posted the receipts (which I just found cleaning out my desk the other day) but hopefully I’ve shown enough of my receipts in the past that you know I don’t make up any data.

The ATM Transaction from Barclay’s Bank: Using my Charles Schwab Checking account (which reimburses me for all ATM fees), I took out 11,200 MUR  from a Barclay’s ATM in Flic-en-Flac.  Below is a screenshot from my online banking transactions that shows the converted amount was $363.67 USD.  The effective MUR to USD exchange rate was  0.03247.

Schwab ATM Transaction

The Credit Card Transaction:  As always, I use my Capital One Visa credit card for all transactions in foreign currencies because the card has NO foreign transaction fee, and receives the exact rate that is published on Visa’s corporate exchange rate website.  For this purchase, I bought a bunch of groceries from a local supermarket for 2,689.71 MUR.  Below is a screen shot from the Capital One transactions webpage which shows I paid $87.34 in USD.  The effective MUR to USD exchange rate was  0.03247 (same as the ATM rate above!).  Please notice that the exchange rate is for September 16th (posting date) not September 14th.

CapitalOne Transaction

The Hotel Front Desk Currency Exchange:  Just for fun, I took a picture of the exchange rate offered by the hotel when I got back from my grocery shopping trip.   I didn’t actually change any money, because as you will see it was a horrible rate.  The exchange rate from the hotel was .0348 (1/28.771).   If I were to get 11,200 MUR like I did for the ATM, it would cost me 389.28 USD instead of 363.67 from the Barclay’s ATM.  That is $25.61 extra, or a 7% surcharge!

Hotel Exchange

Comparing the Three Methods:  It should come as no surprise that exchanging money at a Hotel is a bad deal.  However, similar to the previous post comparing ATM and Credit Card Exchange rates, it turns out that getting money from an ATM or paying with your credit card is almost the same when it comes to exchange rates.  In the previous post, comparing the ATM to credit card was a little difficult because the credit card transaction was posted a day later than the ATM transaction.  In this particular case, making the transactions on a Saturday actually worked in our favor, which means we can compare the rates apples to apples.

As explained on Visa’s currency exchange FAQ page, “Every day—except weekends, Memorial Day, Christmas Day and New Year’s Day—Visa calculates the rate for the next day’s transactions.”   That means on Friday September 13th, 2013, Visa calculated the exchange rates for Saturday the 14th, Sunday the 15th, and Monday the 16th.  I checked on the corporate exchange rate to make sure, and the rate was the same for all three days.  So even though the transaction occurred on the 14th and was posted on the 16th, the exchange rate was the same.

The fact that the ATM exchange rate is exactly the same (to the 5th decimal point) as the Visa exchange rate makes me think that my Charles Schwab debit card – which is also a Visa – probably uses the Visa corporate webpage rates as well.


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.

ATM Transaction

Schwab Transaction

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.

Credit Card Geneva

Capital One Transaction

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.

Friday Exchange Rates

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.

Saturday Exchange Rates

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!

How does Visa Calculate its Currency Exchange Rate?

In my previous post, I explained exactly how Capital One calculates its currency exchange rate.  As it turns out, Capital One simply uses the exchange rate that is posted on the Visa Corporate Exchange Rates webpage (Link Updated 11/2014).  But what about Visa?  How do they come up with the rate that all Visa branded credit cards use (before the bank foreign transaction fee), and how does that compare with other options for currency exchange?

So how does Visa calculate its currency exchange rate? has a very informative currency exchange FAQ page.  Since it is pretty useful, I just copied and pasted the website’s response to below:

Every day—except weekends, Memorial Day, Christmas Day and New Year’s Day—Visa calculates the rate for the next day’s transactions. The Visa rate is selected from a range of rates available in wholesale currency markets or the government-mandated rate in effect one day prior to the applicable central processing date. Visa makes this rate available to issuing banks, which may adjust the rate when billing cardholders by applying a foreign transaction fee. The rate Visa makes available to issuing banks may vary from the rate Visa itself receives. Most consumers find that using Visa is a convenient and cost-effective way to make purchases and obtain cash when traveling internationally.

How do Visa’s currency exchange rates compare with wholesale currency markets?  If you noticed in the statement above, Visa remained pretty ambiguous about how they come up with each day’s exchange rate.  They only state that “the Visa rate is selected from a range of rates available in the wholesale currency markets…”  Needless to say, I’m curious to know how Visa’s rate compares to this “wholesale currency market. ”  To answer this question, I looked up the currency conversion rate from a number of different sources and put them in the tables below.  With the exception of Master Card and Visa, every source can be considered a player in the wholesale currency market.  The rates listed in Yahoo!Finance, for example, are said to be “bank rates,” while OANDA says its rates reflect interbank rates for transactions of $1 million or more.

I looked up the currency conversion rates on three different dates, just to see if there were any discrepancies.   The  tables contain the EUR to USD currency exchange rate for a transaction that was posted on the given date.  Each date is sorted by highest cost (in USD) of 50 Euros.  For more information on the sources, please see the bottom of the post.

Currency Rate Comparison

What are the takeaways from these charts? 

  1. The rankings are different on any given day.   On July 30th, Visa had one of the  worst exchange rates, but on September 16th it had one of the best.  To me, this says that on average, Visa rates are a pretty good representation of wholesale markets.  Obviously my sample size of only 3 days makes it impossible to draw any scientific conclusions, but just with this quick look I feel pretty comfortable taking Visa’s word.
  2. Master Card has consistently one of the worst rates for every day.  In the 3 days I looked at, Master Card always had a higher rate than Visa, costing you anywhere from 2 to 29 cents more that Visa on a transaction of 50 Euros.
  3. The OANDA rate is always better than the Visa or Master Card rate.  This, however, is not surprising since the OANDA rates are said to reflect interbank transfers over $1 million dollars.

Conclusion:  While I may not get the same rate as I would when I was transferring millions of dollars, it is pretty clear (again only 3 sample dates) that Visa’s rates are competitive with the wholesale currency markets.  Kudos to Visa for actually telling the truth on their FAQ website!

*Update January 6th 2015*

Based on a recent reader comment, I took a look at the exchange rates to compare Visa vs. Master Card.  In my comparison for rates on January 2nd, 2015, MasterCard rates were better than Visa, which is the opposite of what I found in 2013.  It’s anyones guess as to what may have caused this:  Maybe Master Card will continue the trend of having better rates, or perhaps the better rates swing back and forth between Visa and Master Card from month to month or year to year.  I’ve included a spreadsheet screenshot for the latest analysis so you can see too:

Jan2015 Rates

Description of Sources:

  • Visa: This is the rate used for all EUR to USD transactions, the details are described above.
  • MasterCard: This website has a similar conversion tool to Visa where you input the date and the type of currency.  The website also states the following as a disclosure: “MasterCard uses multiple market sources (such as Bloomberg, Reuters, Central Banks and others) to develop exchange rates. These rates generally reflect either wholesale market rates or government mandated rates that are collected during the daily rate setting process. The displayed rates are derived from the buy and sell rates included in the MasterCard daily rate setting process and do not include any charges or markups applied by the Issuer. Please note that due to possible rounding differences, the displayed rates may not precisely reflect the actual rate applied to the transaction amount when converting to the card holder billing amount. The exchange rate that is applied to a transaction is the exchange rate as of the day of settlement which is the day that MasterCard determines the settlement amount to be exchanged between the acquirer and the issuer. The settlement date is therefore typically different from the date of the actual transaction. MasterCard does not provide the exchange rate when purchases are converted from the local currency by the merchant to the cardholder’s currency at the point of sale.”
  • European Central Bank (ECB):  In order to find the historical rates, you have to navigate to this page which shows the ECB reference exchange rate at 2:15pm CET.  The ECB does not provide rates for Saturdays or Sundays.
  • OANDA:  According to this page, “The prices quoted by the currency converter are based on interbank market rates and generally reflect the exchange rates for transactions of US $1 MILLION or more.”  The rate from this website is the Daily BID rate (as opposed to Ask or midpoint)  because “it more accurately mimics the rate that you would be charged if you were exchanging money.”  Daily is defined as the 24-hour period ending 22:00 UTC on the day prior to posting.  Sunday rates are identical to Monday rates at OANDA.
  • Google Finance:  The daily rates  from Google say they are taken at 23:00.  It does not indicate which time zone.  Google does not provide rates for Saturdays or Sundays.
  • Yahoo! Finance:  The only note on Yahoo’s webpage says that “The exchange rates given are ‘bank rates’.  High street rates may be subject to commission.”  Yahoo! does not provide rates for Saturdays or Sundays.  If you select a Sunday, say October 6th, it will show you the rate for Friday October 4th.
  • The rate given by this site is the Mid-market rate as of 16:00 UTC on the specified date.
  • ExchangeRates.Org: This rate is the average rate for the specified date.  Here, Friday and Saturday rates are always the same but Sunday rates are different.

Sources Not Included:

  • Discover Credit Cards:  Unlike, Visa or MasterCard, there is no separate currency conversion webpage for Discover.  This was the only information I could find.
  • American Express Credit Cards:  Perhaps it’s because American Express does a lot of currency conversion (traveler’s checks, kiosks etc.) but I couldn’t find a satisfactory link that listed their currency conversion rates. The only link I found was a link titled “American Express – Currency Converter.”  The link turns out to be basically the same information as the OANDA link above (in fact the site says “powered by OANDA”), except it is just presented in a different format.


How does Capital One Calculate its Credit Card Currency Exchange Rate?

Typically, when you use an american credit card to buy a product in a different currency, the credit card company will charge you a 2-3% fee right away – called the foreign transaction fee – before it converts the currency according to the latest exchange rate.  If you travel a lot, the foreign transaction fees can add up very quickly.  Fortunately, there are a number of credit cards, including all Capital One cards, that charge NO foreign transaction fees. For a list of these cards, use this post from Nerd Wallet .   If you are reading my post, however, I’ll assume you already know about the no transaction fee credit cards, and are interested in some more in depth questions like: How does the credit card company determine their currency exchange rate, and can the credit card company use the exchange rate to charge hidden fees?

The best way to answer these questions is to use an actual credit card transaction with my Capital One Visa card as an example.  I will provide copies of my receipt and credit card statement of one  transaction in Part 1.  In Part 2, I’ll answer questions about the currency exchange.

Part 1 – The Transaction Documents:

I am a proud owner of a Capital One Visa card precisley because of its no foreign transaction fee.  I have taken the liberty of posting photos of 1. my actual paper receipt, 2. a screenshot of my credit card Statement, and 3. a screenshot of my transaction list from Capital One’s website.  All of these documents contain information about a customs tax transaction that I made in Hannover, Germany on February 1st, 2013.

1. Actual paper receipt: Below is a photo copy of my receipt (Quittung) from the Customs Office (Hauptzollamt) in Hannover, Germany.  The important information here is the Total (Summe) I paid, which was 37.80 Euros, and the date (Einzahlungstag), which was 01.02.2013.  Please note that the date on this receipt is in DD.MM.YYYY format, which is typical in Germany.    

Paper Reciept

2. Screenshot from my Captial One Credit Card Statement: When I paid  37.80 Euro for the custom tax, I used my Capital One credit card where I have an account in the United States.  Since my account is in US Dollars, the transaction had to be converted from EUR to USD before it showed up on my statement.  Below is a screenshot of a small part of my February Credit Card Statement (my account number is blacked out) where it lists the transaction “Nebenzollzahlstelle HannoHannover” and the exchange rate used.  You can see that my 37.80 Euro transaction became a 51.84 US dollar transaction once the exchange rate was applied.

CaptialOne Statement

3. Screenshot from my transactions list on Capital One’s website:  Below is a screenshot of my transactions list that you can find by logging into your Capital One online account.  The transactions listed here are exactly the same as the transactions that show up in your monthly credit card statement, with one notable difference.   In the online transaction viewer, you can click the “+” button next to the transaction date and it will show you both the Transaction date, and the Posting date  In my example, it shows that while the transaction actually occurred on February 1st, the transaction did not post until February 2nd.  This is an important distinction because Capital One (and most credit card companies) calculate the exchange rate based on the date of the posted transaction.

Transaction and Details


Part 2 – The Currency Exchange:

How does Capital One determine its currency exchange rate? The answer is pretty simple actually.  Capital One uses the exact exchange rate that is posted on the Visa Corporate Exchange Rates webpage (Link updated 11/2014).   This is based on my conversations with Capital One customer service, other credit card message boards like here, and – most importantly – checking the data for myself.  Below are two screen shots of Visa’s webpage (the input screen on top and the output screen on the bottom) that show Visa’s exchange rate for February 2nd, 2013.

Visa Input Page

Visa Output Page

You should take note two things.  First, is that I set the the bank foreign transaction fee to 0%.  Second, is that Visa’s exchange rate is the inverse exchange rate of what was provided on my credit card statement.  The  exchange rate  on my credit card statement was in USD to EUR, whereas the Visa exchange rate is given in EUR to USD.  In order to compare apples to apples, I converted Capital One’s exchange rate to a  EUR to USD rate.  This is done simply by taking the inverse:  1 / 0.72916667 = 1.371429.  In the end, the exchange rates do not match exactly – Capital One  has an exchange rate that is .005% (five thousandths of one percent) higher.   The difference, however, is negligible, since both exchange rates result in a final cost of $51.84 after rounding.


Does Capital One hide extra fees in its exchange rate? No, not that I can tell.  A lot of people are skeptical when they hear Capital One say “No Foreign Transaction Fees!”  They think that maybe Capital One makes up for the 0% transaction fee by having a higher currency exchange rate than other cards that are Visa sponsored.  In fact, you might look at the extra .005% that is added in my example above and say “Aha! thats how they get you!”  But that would that be really silly for Capital One, who makes entire advertising campaigns on “No Fees.”  If they were going to try and recoup the money they lost by having a 0% foreign transaction fee, wouldn’t they increase your exchange rate by a lot more that .005%?  After all, other banks charge up to 3% foreign transaction fees.

After reviewing a few of my other credit card transactions,  I found that the difference between Visa’s exchange rate and Capital One’s exchange rate varied for every transaction.  Capital One does not up-charge .005% for every transaction, in fact, sometimes the Capital One exchange rate is lower than Visa’s.  I’ve compared three of my transactions below, two of which were posted on the same date.  Interestingly, Capital One listed two different exchange rates for the two transactions that were posted on the same day.  I won’t post screenshots of my statements and receipts like the first example for the sake of brevity – you’ll just have to take my word for it.

Transaction Comparison

Why the variation in Capital One Exchange Rates?  The difference in exchange rates appears to be the result of Capital One trying to avoid having to deal with tenths or hundreths of a cent.  Allow me to explain.   In transaction 2, when you multiply 409.60 Euros by 1.307666  (Capital One’s inverse exchange rate), you get $535.6199997.  When rounding up at a precision of 6 decimal places, you end up with $535.620000 exactly.   As shown in the screenshot below, all of Capital One’s currency exchanges result in perfectly whole numbers (no fractional cents) when you round and use a precision of 6 decimal places.

Decimal Precision

I assume that this means that Capital One uses 6 decimal points for all of their banking transactions.  If they used Visa’s exact exchange rate instead and rounded with a precision of 6 decimal places, they would have charged me $535.616307.  Since I am only going to pay Capital One exactly $535.62, they would in effect be losing $0.003693 ($535.620000 – $535.616307) for that transaction.  When you think about the millions of transactions that they process every year, that small amount could end up being pretty big – just ask the characters in the movie Office Space.  For me, as the credit card holder, the slight difference from Visa’s currency exchange rate doesn’t matter because I always end up paying the correct amount and don’t have to worry about fractional cents.

In the end, the important thing to know is that Capital One really does just use the exact exchange rate posted by Visa.  This is also supported by the nerd wallet study, which shows that while foreign transaction fees can vary among credit card companies, the exchange rates don’t.  Now that you know exactly how Capital One does it, you are probably curious how Visa comes up with their rates and how they compare with other methods of currency exchange.  These questions are tackled in the next post How does Visa Calculate its Currency Exchange Rate?