Paying abroad: cards, ATMs and the “pay in your home currency?” trap

What “pay in your home currency?” really means

When you pay by card in a foreign currency, someone has to convert the amount. Normally that is your own bank or card issuer: the payment goes through in the local currency, and the conversion happens on your bank's side, at its rate and with its fees.

Dynamic currency conversion (DCC) moves that job to the shop's or the ATM's side. If you accept the offer to pay in your home currency, the merchant's payment provider converts the amount at a rate it chooses, and you see the final figure in your own currency on the spot. That convenience is real — you know the exact amount at once — but the rate usually carries a mark-up, and DCC providers openly tell merchants that they earn a commission on every converted transaction.

DCC is offered at shop counters, restaurant tables, hotel desks, ATMs and by online merchants. It is legal, and the card networks' rules say you must be offered the choice and that the merchant must respect it. The problem is that the choice is easy to get wrong, and expensive when you do.

What it costs: what the tests found

Fees depend on the country, the machine and the provider, so read the figures in the table below as orders of magnitude, not prices. They come from tests collected by BEUC, the European consumer organisation, in a 2017 position paper.

Two patterns stand out. Cash machines tend to cost more than shop terminals, and the extra cost is buried in the exchange rate rather than shown as a fee. One ATM screen reproduced in the BEUC paper stated that the commission was zero, while small print disclosed a margin of 9.99% over the wholesale rate, built into the exchange rate.

Accepting DCC does not necessarily switch off your own bank's charges either. Australia's consumer regulator, the ACCC, warns that your card issuer may still charge its international transaction fee when you pay in your home currency, because the purchase still happened abroad. In the worst case you pay twice: the merchant's mark-up and your bank's fee.

The screens that nudge you — and which button to press

The rule fits in one line: always choose the local currency, and let your own bank convert. In Japan, pay in yen; in Thailand, in baht; in the Czech Republic, in koruna.

Following it is harder than it sounds, because the screens are not neutral. BEUC describes ATMs and terminals that use colours, button size and flashing messages to steer people towards conversion; menus where the local currency is option 1 on one machine and option 2 on the next; and anecdotal reports, gathered by its UK member, of DCC being applied without the customer being offered a choice at all. Peer-reviewed experiments by researchers at Utrecht University (Gerritsen, Lancee and Rigtering, 2023) found that pre-selecting DCC pushes people towards it, and that people with lower financial literacy are hit hardest: they did not choose DCC any less as the mark-up rose. Showing the mark-up as a percentage, with both prices in the same currency, helped people at every level of financial literacy choose better.

• At an ATM: look for “continue without conversion” or similar. The button that says “with conversion”, or that shows the amount in your home currency, is DCC.
• At a card terminal: if the screen offers two amounts, pick the one in the local currency. If you are handed a terminal already showing your home currency, ask for the payment to be cancelled and run again in the local currency before you tap or type your PIN.
• At a restaurant table or hotel desk, say it before they start: “local currency, please”.
• Online: foreign shops and booking sites can offer to charge you in your currency at checkout. The same rule applies — pick the site's local currency.
• Check the receipt. If it shows an exchange rate and an amount in your home currency, DCC was applied; ask for a refund and a new charge there and then, which is far easier than disputing it later.

What the rules give you

Within the European Union, the Cross-Border Payments Regulation requires currency conversion charges on card payments to be expressed as a percentage mark-up over the European Central Bank's latest reference rate, and disclosed before the payment is made. That percentage is the number to look for: anything above what your own bank charges is money lost.

Outside the EU, disclosure is less standardised. The US government's travel-card programme gives its own staff simple advice that works for anyone: ask which exchange rate the merchant will use, and treat paying in the local currency as the cheaper option unless you can confirm otherwise.

What to ask your bank before you leave

Your bank's own conversion is not free either, and it varies a lot from card to card. A few minutes in the app or on the phone before the trip settles most of it:

• Do you charge a foreign transaction fee on purchases in another currency, and how much?
• What does an ATM withdrawal abroad cost — a fixed fee, a percentage, or both? Is there a daily limit?
• Which exchange rate do you use, and do you add a mark-up on top of it?
• If I accidentally accept DCC, do you still charge your foreign fee?
• Does the card work abroad as it is, or do I need to enable it in the app?
• Do I know my PIN? ATMs abroad will ask for it, and so do some terminals.
• Which number do I call from abroad if the card is lost, stolen or blocked?

Cash or card: a simple framework

There is no single right answer, because cash habits differ from country to country and change over time. Our city guides mention local habits where they matter — the Tokyo guide notes that cards are widely accepted but small restaurants and shrines still like cash, and the Buenos Aires guide suggests checking the current card-versus-cash advice before you go. Beyond that, a few principles hold almost everywhere:

One warning about cash. Using a credit card at an ATM is usually a cash advance, not a purchase: the US Consumer Financial Protection Bureau notes that interest starts as soon as you withdraw, commonly at a higher rate than for purchases, on top of a cash-advance fee and possibly the machine's own fee. For cash, use a debit card.

• Use a card, in local currency, for most payments: it leaves a record and can be blocked if lost.
• Carry a small amount of local cash for markets, small vendors and the first hours after you land.
• Since each withdrawal can carry a fixed fee, take out fewer, larger amounts rather than many small ones — but no more than you are comfortable carrying.
• Take at least two cards, ideally on different networks, and keep them in different places.
• If you buy foreign cash before you leave, compare rates first; the ACCC notes that many suppliers offer better rates and lower fees when you order online.
• Don't depend on a phone wallet alone: it needs a charged phone that hasn't been lost.

Deposits and holds at hotels and car rentals

Hotels and car-rental desks often don't charge you at check-in. Instead they place a hold — also called a block or pre-authorisation — on your card for an amount meant to cover your bill. The money isn't taken, but you can't use it. On a credit card it eats into your limit; on a debit card it ties up money in your account, which can get your next payment declined. That is why a credit card is usually the better one to hand over for a hold.

The currency question comes back at checkout: the final bill is paid on a terminal like any other, and the answer is the same. The US Federal Trade Commission's advice on holds works anywhere:

• Ask at the desk: are you putting a block on my card, how much is it, how did you choose that amount, and how long does it last?
• Pay the final bill with the same card you used for the reservation or check-in; the final charge will then most likely replace the block within a day or two.
• If you pay another way, tell the desk and ask for the earlier block to be released promptly — otherwise it may last up to 15 days.

Checklist

Print it, screenshot it or save it with your booking:

• Before you go: ask your bank the questions above and note the purchase and ATM fees for each card.
• Pack two cards, kept apart, and either a little local cash or a plan to withdraw some on arrival.
• Save your bank's emergency number somewhere other than your phone.
• Every payment: choose the local currency. Every ATM: choose “without conversion”.
• If a terminal already shows your home currency, cancel before paying and ask for the local currency.
• An exchange rate printed on a receipt by the merchant means DCC was applied — ask for it to be redone.
• Use credit cards for purchases, not ATM withdrawals.
• At hotels and rental desks: ask about the hold, and pay the final bill with the same card.
• Back home: compare your statement against your receipts and report anything unexpected quickly.