Travel: Should you pay in the local or your home currency?

Purchasing souvenirs is always a big part of my travels. Not a day goes by that I don’t catch a glimpse of an Italian print, a Dutch magnet, a British mug and a famous French tower that, together, make up a gallery of travel experiences inside our home. And, each time I went to purchase those items, with my credit card in hand, the cashier would ask if I wanted to pay in the local or my home currency.

No matter if the local currency was Euros, British Pounds, Swedish Kronor, Danish Kroner or Czech Crown, the credit card process always triggered that same question.

After several trips aboard, I kept meaning to find out more. To find out what is the better decision when it comes to choosing to go local or stick with my home currency. And, to see how that one decision, made at the register, could impact me when the credit card bill came in the mail.

And, then, wouldn’t you know, the answer came to me – at a hostel in Copenhagen.

There, on a board filled with information on when the DJ would start spinning tunes in the lobby that evening, when the free English tour kicked off the next morning, and when the weekend’s Pride Parade started, blazed that one important question: “Own currency or local? (With credit or debit card).”

The copied pages, laden with highlighter and pinned to the board, under the appropriate header, “Interesting Info of the Month,” answered the question that plagued me again and again at the register. There, it said: “Local currency wins…and this is why!!”

Choosing to not to pay in the local currency can make it more expensive for you to buy your coveted souvenir.

Why is this the case? It all boils down to something called Dynamic Currency Conversion, a financial service that converts the cost of a transaction to your home currency right as you stand at the cashier with your credit card in hand -  ready to insert into the card reader.

While its helpful to be able to see the cost in your home currency - at an exchange rate used by Dynamic Currency Conversion operators, that’s where the benefits end. Because, that exchange rate often tends to be less favorable than the one offered by your credit card company.

Why is that the case? Because it reflects the foreign exchange rate charged by the credit card company plus a fee paid to the merchant and to the Dynamic Currency Conversion operator - which could be about three percent of the purchase price. That makes it more expensive for you to make your purchase if you choose to do so with your home currency.

So, what should you do when asked if you should pay in your home currency? Simply say no, and ask to pay in the local currency instead.

Your response will allow the salesperson to complete the credit card transaction without the Dynamic Currency Convertor option – and save you an added (and unnecessary expense) in the long run.

If you’re like me, the extra money can be used for better things like enjoying one more slice of pizza, one more pain du chocolat, one more smørrebrød, one more cup of matcha and yes, even, one more souvenir to add to the coveted ones displayed in your home.

Do you typically choose to pay in the local currency or your home currency when purchasing items with your credit card during your travels abroad? Please share your thoughts and experiences in the comments below.

The question I needed to answer - on the wall of a Copenhagen hostel.

The question I needed to answer - on the wall of a Copenhagen hostel.

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