When traveling to a foreign country you might get asked if you would like to pay in US Dollars or the local currency.  During our trip to Thailand I was asked this about a dozen times – everywhere from hotels to restaurants to shops.

The correct answer is ALWAYS the local currency – let me show you why.

Starbucks Offer

We stopped in Seoul South Korea for a day on our journey home from Thailand.   On our day in Seoul, we decided to take the train into the city and stopped at a popular shopping district.

By the middle of the day, we were tired and thirsty.  We stumbled into a Starbucks and got a shaken green iced tea (I love them).

When paying, they asked me if I wanted to pay in US dollars or South Korea Won and actually printed out the below ‘offer’.

As you can see they charge a 4% conversion margin (a fee) with the 1 USD = 1,072.11 Won exchange rate.

I politely declined paying in USD and just used my no foreign transaction fee Citi Prestige Mastercard.

As you can see by my credit card statement, I ended up paying $5.61 instead of the $5.88 quoted in the offer.

In addition to saving the 4% fee, Mastercard also had a slightly better exchange rate (1,134.57 Won) than the Starbucks offer using Alliex rate (1,072.11 Won)

I know you are thinking ‘Big Whoop’ he saved 17¢.  But this was just for an iced tea, but the savings can add quickly if you are making larger purchases or paying for your hotel stay.

Visa vs Mastercard

A couple years ago I read an article on Hungry for Points that using a Mastercard instead of a Visa card produced ever so slightly better exchange rates.  This has always stuck in my head and I was prepared using my Citi Prestige Mastercard for almost all our purchases on this trip.

But during our shopping day in Seoul, my wife and I got split up a few times.  And she used her no foreign transaction fee Bank of America Alaska Airlines Visa for a few purchases.

I was curious to see if the Hungry for Points article was correct that Mastercard had better exchange rates than Visa.  I waited for the statements to close and checked out the transactions from July 13th.

Matercard had a 1,134.57 Won to 1 USD rate (3,250 / $2.89) on the July 13th purchases which posted the same day.

Visa on the other hand had a rate of ~1,121 Won to 1 USD.  Notice even though the transactions occurred on July 13th, they didn’t post until July 16th and July 17th (Monday & Tuesday).

Since the Visa transactions didn’t post until July 16th, I couldn’t do an exact comparison to Mastercard without going to Visa’s online exchange rate calculator.

After plugging in 37,000 Won to match the first transaction above, Visa would have charged $32.97 if the transaction was processed on July 13th instead of July 16th which works out to 1,122.33 Won to 1 USD.

So now I can compare Mastercard’s exchange rate of 1,134.57 Won vs Visa’s 1,122.33 rate.  Mastercard is giving you a slightly better exchange rate (12.24 Won more than Visa which works out to be 1.1¢).

Obviously my Visa vs Mastercard experiment was very small only on a single day with a couple transactions.  Hungry for Points tested many more days, times, cards, etc – but he also found Mastercard to have a slight advantage over Visa.

The difference was so small between Mastercard and Visa – you would be better off maximizing your credit card bonus categories (3X points on dining or travel, etc) rather than worry if you used a Visa or Mastercard.

Need to Knows:

• Always pay in the local currency to avoid having to pay an extra fee
• Be sure to use a credit card that has NO foreign transaction fees
• Don’t forget to use the no foreign transactions fee credit cards for bonus points/miles (3X at restaurants, 2X at hotels, etc)
• If you have both a Visa and Mastercard that both have no foreign transaction fees and both offer the same bonus points/miles – use the Mastercard for an ever slightly better exchange rate

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