What Foreign Currency Exchange Rate Do Credit Card Issuers Use?

Given the exchange volatility due to Brexit, I thought it would be worth touching on how exchange rates are calculated again, so I’m reposting this.

I’m travelling to Europe soon, all of the countries I am visiting use the Euro but I am wondering what rate my credit card issuer will use? I’m trying to estimate how much my $200USD a day budget will be in €.


The exchange rate that you receive is set by the payment network (e.g Visa, MasterCard or American Express) and not by your credit card issuer. Your credit card issuer can charge you a fee for any transaction that is charged in a foreign currency, this fee is typically 1-3% although more and more cards are now no longer charging this fee.

As we mentioned earlier the rate you pay is dependent on your payment network, so let’s look at the three major networks (we’ve excluded Discover as they have a very small footprint internationally and we couldn’t find any information on how rates are calculated).  to see how they determine the currency exchange rate.

American Express

American Express state how they determine the foreign currency rate you’ll receive in your card member agreement. The relevant information is found in “Converting charges made in a foreign currency“. It reads as follows:

If you make a charge in a foreign currency, we will convert it into U.S. dollars on the date we or our agents process it. Unless a particular rate is required by law, we will choose a conversion rate that is acceptable to us for that date. The rate we use is no more than the highest official rate published by a government agency or the highest interbank rate we identify from customary banking sources on the conversion date or the prior business day. This rate may differ from rates that are in effect on the date of your charge. We will bill charges converted by establishments (such as airlines) at the rates they use.


MasterCard does their currency conversion based on your settlement date (e.g if you purchase something on the 16th of April and it doesn’t settle until the 18th of April you will get whatever rate they have set for the 18th). MasterCard state that they use “multiple market sources (such as Bloomberg, Reuters, Central Banks and others) to develop exchange rates”.

They provide you with currency conversion tool, you set the settlement date and your base currency and they show you a list of calculated cross rates. Let’s have a look at the data from January 21st, 2015:

  • EUR: 0.865951
  • AUD: 1.235178
  • CAD: 1.238300
  • GBP: 0.659065
  • JPY: 117.160000
  • CHF: 0.877000
  • ZAR: 11.471200


Visa also does their currency conversion based on your settlement date. According to Visa, this is how they calculate the rate:

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.

They also provide cardholders with a calculator that can be used to give an indication of the rate you will receive . Again, let’s have a look at the data from January 21st, 2015:

  • EUR: 0.865264
  • AUD: 1.224317
  • CAD: 1.210779
  • GBP: 0.664165
  • JPY: 118.888111
  • CHF: 0.884012
  • ZAR: 11.688431

Rate Comparison

Below I’ve included a table which lists the foreign currency exchange rates that Mastercard & Visa offer, along with the rates that OANDA (low & high and we used the date range of 20th-21st) and XE.com had for January 21st, 2015.

American ExpressNo Rates ProvidedNo Rates ProvidedNo Rates ProvidedNo Rates ProvidedNo Rates ProvidedNo Rates ProvidedNo Rates Provided
OANDA High0.86341.22121.20020.6611118.30.876511.6247
OANDA Low0.86291.21691.19660.6603117.350.867611.5851
XE Mid-market rates0.8619841.2404691.2360010.660547118.31340.86484511.51876

Obviously looking at one day of data is statistically insignificant and pretty much meaningless. What’s interesting though is that sometimes the credit card rates are actually better than the rates XE & OANDA published, presumably because Visa & MasterCard are calculating their rates on day old data.

In terms of Visa vs Mastercard, Mastercard had the better rate in three markets whilst Visa had the better rate in four markets. In the past people have reported receiving a hidden ~1% difference in foreign exchange market but this doesn’t seem to be the case anymore.

Rate difference (MC – Visa)0.0006870.0108610.027521-0.0051-1.728111-0.00701-0.21723

The difference between the two was quite small.

Why Are/Aren’t Foreign Transaction Fees Charges?

The main reason that a card issuer will charge a foreign transaction fee is that the payment networks charge them a fee for any transaction in a foreign currency (it’s also a good chance for them to generate additional revenue).

  • Visa charges 0.15% – 1% for use of their global payment system (e.g any transaction in a foreign currency)

More and more card issuers are no longer charging any foreign transaction fees, the main reason for this is that they want their credit card to stay top of wallet. The idea is that whatever credit card is at the top of your wallet, is the credit card you will use the most. If cardholders have a credit card with a foreign transaction fee that is usually at the top of their wallet and go overseas, they will likely switch to a card that doesn’t have this fee. When they come back to the United States, the card with no foreign transaction fee will still be top of wallet and likely stay there.

Final Thoughts

When it comes to foreign currencies there are a few tips to help you:

  • Make sure you use a credit card that does not have any foreign transaction fee. These fees can be 3% or even 5% which is much higher than any potential currency difference between different payment networks.
  • Be careful of dynamic currency conversion. I’m still yet to see a situation where dynamic currency conversion has not been a massive rip off for the consumer, if you get offered dynamic currency conversion make sure you decline it. Better yet, lodge a complaint with Visa or Mastercard over this deceptive practice. Not sure what dynamic currency conversion is? Or why you should care? Read this.
  • EMV chip & PIN requirements are becoming more common place. If you travel internationally often you will find that most countries now use EMV chip + PIN technology as standard, they are supposed to accept credit cards without this functionality if they were issued outside the country, but this can often be extremely difficult to explain. Automate kiosks (like those found at train stations) will not accept credit cards without an EMV chip + PIN, this could lead to a long line at a manned kiosk or you without a ticket if they are closed.
  • Consider the rewards structure on your credit card. If you have one credit card that earns 2% cash back and another with no rewards program, then you will almost certainly be better off going with the card that earns 2% cash back (assuming they both have no foreign transaction fee).

I think all of the above points are more important than what credit card payment network you use, as Visa & MasterCard will switch between offering the best rates. Tomorrow we’ll look at an app that helps decide whether Visa/MasterCard is the better choice on a particular day and why.

Note: I originally wrote this article back in 2015 and never published it as I was waiting for both Discover & American Express to make it clearer how they calculate their exchange rates and give me historical data that could be used. They never replied to our queries, so I thought it best to post especially with some speculation on how foreign currency exchange rates are calculated. I also spent a lot of time researching this article and it’s correct to my knowledge, this isn’t something I knew a lot about unfortunately so I’d appreciate any corrections about mistakes in the comments. Please remember to cite sources if used.


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Now in 2022 I think both VISA and MasterCard use the exchange rate from the transaction date, not when the charges post. I’ve always thought my Citi Prestige MasterCard would give me the best rate, but that wasn’t the case on my recent trip to Mexico. Chase Sapphire Visa was using Visa’s exchange rate that’s posted publicly. But Citi Prestige exchange rate was worse than MasterCard’s exchange rate (which is better than Visa’s generally) by 0.4~0.8%. I assume this is because Citibank has a big presence in Mexico and Citi does their own currency exchange, as opposed to using MasterCard to do currency conversion, and Citi’s rate isn’t as competitive as MasterCard’s. So I won’t use Citi MasterCard in Mexico.

S. Gilfillen
S. Gilfillen

Very nicely written and helpful post. Recently had to transfer Euros from European Bank to US. Found major variation in fees. Also made some charges in EU using VISA. Fees with US based credit card although high, are well posted. However, the rate of exchange with Visa was above the daily rate and Visa has not been willing to explain or justify this amount that appears to be no more than a hidden fee on top of the local banks fees. Thankfully amount was small for me but this is probably what Visa is banking on.


We just took our first trip to a euro country. Not knowing any better I went to US Bank to buy some euros. They use “Travelex”. What a rip off. I asked the bank teller what exchange was being used and of course she had no idea–“whatever the computer says” which was 1.20216120. Later I checked the internet and the rate was 1.12… When I followed up with the bank, after we got back from our trip, they just told me that they charged the “retail rate”. So I paid about a 7% hidden fee. That should have been disclosed. To add insult to injury, I think I paid the fee again when I exchanged the leftover euros back to USD. When I used my VISA in EU, they charged something close to the wholesale rate–much better.


I would like to add an additional point to my data above. It appears that Visa is charging a 1.44% or 1.46% higher rate than Master Card for the day that I used my cards above in Canada. 1.308329699 minus 1.289473684 equals 0.018856015. If you divide 0.018856015 by 1.289473684 you obtain 0.014623 or 1.46%. If you divide 0.018856015 by 1.308329699 you obtain 0.014412281 or 1.44%.


The Visa exchange rate changes multiple times even by the hour. Capital One Visa lists the exchange rate on the credit card statement. Below are data points for part of my recent trip to Canada. On June 16 I paid for parking at the rate of 1.289062500. Within 15 minutes or so I paid for admission to the museum at the rate of 1.289237668. In the evening for dinner I had the exchange rate of 1.289473684. After about 30 minutes I bought another dish at the exchange rate of 1.289325843. Using my Capital One 360 ATM card which is a Master Card for a fee-free and no foreign exchange fee for Allpoint ATM use some time in between my museum and restaurant visits, the exchange rate was 1.308329699.


@joshua, are you sure the differences aren’t due to rounding to the nearest cent?


This is not rounding. I wrote that Capital One Visa lists the exchange rate on the credit card statement. Specifically, Capital One Visa listed the values with all the values after the decimal point of 1.289062500, 1.289237668, 1.289473684 and 1.289325843. The Capital One 360 ATM card Master Card is a value that I calculated as the bank statement does not show the exact exchange rate.


It is definitely rounding. The rate shown on the bill is merely a calculation of forex divided by charged amount.

The rate used is one amount, but since they can’t charge you fractions of a cent, they have the round the USD part.


May I share here my documented personal experience on this topic (partially inspired by the previous posting of the same article)? Despite the rumor, I did not find MC to provide that much advantage.



Even though the Belize Dollar is officially pegged to the USD at 2:1, I thought I would get that rate when using my CSP (that doesn’t have a FOREX fee). Nope, despite being charged in the local currency, and the exchange rate being fixed for decades, they still managed to charge me a premium. There will always be a FOREX fee, even if it’s not itemized on the bill, they charge it in form of an unfavorable exchange rate.


I was actually looking at this issue yesterday when trying to get reimbursed for a recent work trip to London. I can tell you the rate Amex used on Jan 26, 2016 was 0.6975269 GBP to USD. Unfortunately for me, the spread between the rate Amex used and the ONADA rate I will be reimbursed at will cost me 0.65% (e.g., ~$4.75 out of my $733 hotel bill).


I’ve had several hotel instances where my final bill was converted to USD as a “courtesy”. It’s always a waste of time to get this changed back to local currency. I now have it noted at check-in that I want my final bill to be charged in local currency.


Total agree! I was on a business trip in China. Hilton Beijing charged my corporate card in USD. Later I found that the posted amount in USD was 2.5% higher than what’s on the receipt. Later at check out in other cities, I always asked to be charged in CNY.

Now I think about Hilton Beijing might just “offered” me DCC.


On Out And Out Harlan described an app called Mercez which, as I understood it, gives currency exchange rates for specific credit cards. It also includes foreign transaction fees.
I haven’t used it but would like to try it if my phone weren’t too old to support it!