How Do Payment Network Foreign Exchange Rates Compare?

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We always hear about the strength of the dollar – how the U.S. dollar is up or down compared to other national currencies. Global fiat currencies fluctuate in price each day, and all have different exchange rates for one another. An exchange rate is simply how much of one currency is equal to one unit of another currency.

The exchange rate between the U.S. dollar and the Japanese Yen, for example, could be 1 USD/ 109 JPY. You need 109 Yen to buy one U.S. dollar.

When you’re traveling, foreign exchange rates play a central role in how much money you end up spending while you’re away. Swiping (or inserting) a credit or debit card in a foreign country, as well as pulling cash out of an ATM, will have an exchange rate attached. If you play your cards right, you can maximize how beneficial that exchange rate is to you.

The Best Way to Pay Abroad

When you’re in a country where they don’t accept the U.S. dollar, you have a few payment options – exchanging cash to the local currency, using an ATM to withdraw local currency once you get there, or just paying with a credit card like you would normally.

For some of these choices, an exchange rate will determine how much of the foreign currency you get with your dollars. Currency exchange shops, however, charge a notoriously inflated fee to convert your cash. And when you use an ATM abroad you are likely to be charged a fee at the machine as well as a transaction fee from your bank. There are different banks that sometimes reimburse ATM fees and offer a low fee themselves, but they are often reserved for premium account holders.

Luckily for us, the third option (credit cards) can easily come with no currency conversion fee. Most credit cards still do, but a growing number of banks are offering cards with no foreign transaction fee at all.

Of the four main credit card networks, American Express, Mastercard, and Visa all have card options with no foreign transaction fee – while Discover doesn’t charge for currency conversion across all its cards.

But while each credit card network can bring your currency conversion costs down to zero, you will still have to pay for a foreign currency using dollars – which means there will be an exchange rate that determines the dollar amount you are charged. Depending on which logo is on your card (American Express, Mastercard, Discover, or Visa), there will be a different exchange rate.

Which Credit Card Network Has the Best Exchange Rate?

Mastercard

Mastercard has been verified by a number of studies – and even field tests – to have a slightly better exchange rate than both Visa and Amex in most transactions. Both Mastercard and Visa publish their exchange rates, and even have online tools to help you test out their currency conversion rate. Multiple sites have tested it out, and Mastercard mostly comes out on top with a lower rate (less than 1 percent better, for the most part).

Visa

Like Mastercard, Visa has an online tool that features its exchange rate. After analyzing these rates and testing cards out side-by-side in foreign countries, Visa foreign exchange rates usually ends up being less favorable compared to Mastercard – but not always. Exchange rates fluctuate, and on some days or in some countries, Visa converts your currency at a lower rate.

American Express

American Express only has one card without a foreign transaction fee – the American Express Platinum Card (both business and personal). It comes with a $450 annual fee, though. Unlike Mastercard and Visa, Amex doesn’t make its daily exchange rates public, so there isn’t really a way to track it – but research has shown that its rates are closer to Visa’s than Mastercard’s.

Discover

Discover does not make their exchange rates public, unfortunately. There is not much reliable research on how its rates compare to its competitors – but they have been confirmed to be about on par with the rest of them. This is the only network out of the four to have zero foreign transaction fees across all of its cards.

Summing It Up

There is really no clear winner when it comes to exchange rates. All the networks have similar rates. Mastercard does, indeed, frequently end up giving a more favorable rate – but that’s not always the case.

To efficiently manage your money while traveling, you can find cards with no foreign transaction fee or no annual fee – which can have a much bigger effect on your bank account than the difference between credit card networks’ exchange rates. Shop around and see which card is right for your travel needs.