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Two weeks ago, my brother-in-law stumped me with a credit card question. While traveling in Ireland with my family, he encountered retailer after retailer asking if he wanted to charge his purchase with his Capital One credit card in euros or dollars.
Imagine my embarrassment when I couldn't help him answer that question.
To keep things interesting, he alternated between euros and dollars and I promised to find out the difference when I got back stateside.
First stop was Capital One. According to the company, international retailers can offer cardholders the choice to pay in their home currency or the currency of the retailer. If you choose to convert to your home currency, the retailer (or the retailer's bank) can charge you a conversion fee.
Note: That's not same as a foreign transaction fee, which is charged by some card issuers for every purchase you make outside the U.S.
"However, as a Capital One customer you will not pay this fee since Capital One does not charge any foreign transaction fees," noted Sukhi Sahni, a spokeswoman for Capital One.
So my brother-in-law should have charged every purchase in euros and avoided the retailer's conversion fee.
If you carry a card that does charge a foreign transaction fee, it may be cheaper to have the retailer convert the currency at the point of sale. It depends on the conversion fee. Fortunately, Visa requires retailers to provide the consumer with the exchange rate plus any commissions or fees being charged, says Ted Carr, a Visa spokesman. That way, you can compare the retailer conversion fee to your foreign transaction fee.
American Express cardholders don't have to worry about making a choice. The issuer prohibits the practice, according to company spokeswoman Diana Postemsky.
Discover and MasterCard didn't respond to my inquiry about their policies in time for publication.
Have you run into an odd credit card dilemma overseas?
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The key to remember is that merchants are offering this service for a reason. The conversion rate they offer is usually quite bad for the consumer.
Some credit cards charge both a foreign transaction fee and a conversion fee, so even if you let the merchant charge in USD -- you could still be subject to the foreign transaction fee.
I have not seen a scenario where I would want them to convert to USD.
When in Scotland recently, a retailer told me the "rate is 1.74 today" when in fact it was only 1.6-something, so they were charging an extra 5-10% without bringing attention to it. I'm glad I talked with my card issuer (VISA via Schwab checkcard, they don't do fees) before traveling to know that all charges should be in local currency to avoid any merchant fees.