What Are Credit Card Exchange Rates and How Do They Work?
Let’s say you swipe your credit card at a restaurant in Tokyo, and the meal costs ¥3,200. Back home, your bank statement shows a dollar amount that doesn't quite match the amount you expected based on the current USD-JPY conversion rate. This difference largely comes from credit card exchange rates, which affect the total cost of almost every card payment made in a foreign country.
Credit card exchange rates are set by card networks like Visa and Mastercard to help pay for the conversion of a foreign currency purchase into your home currency. These rates are one of a few hidden costs you may encounter as you buy goods overseas with your card. Knowing each of these fees can help you better estimate the total cost of a business trip, which can in turn prepare your accounting team for unexpected values on the end-of-month expense report.
In this guide, we’ll break down what credit card exchange rates are, how they differ from foreign transaction fees, what dynamic currency conversion is, and how to minimize what you pay on cross-border purchases. If you’re looking for a card that can help you save money when traveling abroad, check out the Slash Visa® Platinum Card, which comes with a low 1% (min. $0.40) foreign exchange fee.¹ As you make purchases with a Slash Card, each expense can be automatically categorized, checked for fraud, and automatically synced with your accounting solution.
What are Credit Card Exchange Rates?
A credit card exchange rate, also called a currency conversion rate, is the rate a card network uses to convert another country’s currency into your home currency when you make a foreign purchase. For instance, if you're buying in euros but your account holds USD, the network needs to perform a currency conversion to settle the transaction in dollars.
It’s important to understand that these rates aren’t the same as the interbank or "mid-market" rate you'd see if you looked up a currency pair on Google. Each card network applies their own rate, which typically includes a small markup above the interbank rate. That markup is how the network accounts for currency fluctuations. The conversion fee itself typically runs around 1% of the transaction amount.
Whether you're buying from an international merchant online or you’re physically swiping your card in another country, currency conversion fees apply any time you make a purchase in a foreign currency. The fee is either combined into an overall charge labeled as a foreign exchange fee, or specified as a separate line item on your statement. Either way, it adds to the total cost of just about every overseas purchase.
Visa and Mastercard's Exchange Rates and Fees
Visa and Mastercard are the only card networks accepted in over 200 countries, which tends to make them the most common networks used for international transactions. While they both set their exchange rates daily based on wholesale market rates, the two values aren’t the same thing.
Neither network publishes a fixed rate, since currency markets move continuously. You can look up the current rate for any currency pair using online calculators to get a better sense of what kind of charges your purchase may come with. Another factor to keep in mind is timing; both Visa and Mastercard apply their rate as of the processing date, which may come a day or two after the actual purchase. That means the exact conversion rate can differ slightly from what you saw at the time of the transaction.
Currency conversion fees tend to be more straightforward. Both networks charge a currency conversion assessment of approximately 1%, which is passed through to the cardholder. This fee is separate from any foreign transaction fee charged by your bank or card issuer after the fact.
Difference Between Credit Card Exchange Rates and Foreign Transaction Fees
The two charges you’ll usually be hit with when using a card overseas are currency conversion fees and foreign exchange fees. It might seem like you can use the two terms interchangeably at first glance, but they’re totally different charges, even if they end up getting bundled together on your card statement.
- Credit card exchange rate fees(or currency conversion fees) are set and charged by the card network for converting the foreign currency used in a purchase into your home currency. This fee is usually around 1%, and gets applied before the transaction reaches your card issuer.
- Foreign transaction fees are separate charges added by your bank, credit union, or card provider. These apply any time you make a purchase in another currency or with a merchant that processes payments through a foreign bank. Foreign transaction fees can reach up to 3%, while Slash’s fee is only 1% (min. $0.40). Some issuers combine the network's conversion fee and the exchange rate fee on the final statement, making it difficult to figure out who charged what.
Both charges can and will apply to the same transaction. If your card carries a 2% foreign transaction fee plus a 1% network conversion fee, you'll effectively pay 3% above the base exchange rate. On a business trip where you and your team spend $10,000, that's $300 in fees that you may not have to pay if you use a card with lower surcharges. If you have a strong understanding of your average international spend, knowing how both these rates work can tell you how much you’ll save with one card over another.
What is Dynamic Currency Conversion?
There’s one more type of charge you’ll need to keep in mind when making card purchases overseas: dynamic currency conversion (DCC). DCC is a service offered by merchants and ATM operators that lets you pay in your home currency at the point of sale rather than the local currency of the country you're in. It sounds pretty convenient, but it actually ends up being more expensive in almost all cases.
Imagine you're at a clothing store in Berlin and you swipe your card for a nice pair of slacks. The terminal may ask you if you’d like to pay in USD or EUR. It sounds like USD would be the right decision, and perhaps even a cheaper one. However, choosing USD gives the merchant's payment processor the right to handle the currency conversion on the spot, using its own exchange rate rather than Visa or Mastercard's. That rate’s markup often runs between 3% to 12% above the interbank rate, which can be several times higher than what the card network would charge.
Let’s do the math with a simple €400 ATM withdrawal, which we’ll say is right outside that Berlin clothing store. If you accept DCC and the ATM converts at $1.18 per euro (including its markup), the withdrawal would cost $472. If you decline DCC and let the card network handle the conversion at a standard rate of around $1.10 per euro, the same action would cost $440. That’s a $32 difference on a single €400 withdrawal.
As you can see, you don’t want to mix the two methods up. Here’s a chart that lays out each of the differences between DCC and traditional conversion:
Since merchants receive a revenue share from their payment processor for every DCC transaction, foreign stores tend to push the option aggressively at checkout. The only upside for consumers is the fact that you get to see the exact USD charge before confirming the transaction, meaning you won’t have to wait until later to see the total you were charged. That insight is rarely worth the extra charge, though. Declining DCC and paying in the country’s local currency is just about always the right decision.
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Tips for Managing International Purchase Costs
While you can’t request better rates from your bank and credit card provider, there are still ways to save money when making international purchases. Here are a few strategies businesses and cardholders should consider:
Choose a Low-Fee Corporate Card
From the get-go, you can save money on fees by choosing a corporate card with a low foreign exchange fee. Your typical credit card applies a charge of 2-3% for all cross-border purchases, which can put a real dent in your business trip’s budget. Some travel-focused corporate cards come without a foreign exchange fee, though these cards only fit an audience of high-spend, high-travel teams. For more everyday global spending, the Slash Visa® Platinum Card is a great pick, as it comes with a foreign exchange fee of only 1% (min. $0.40). Additionally, eligible business purchases made with the Slash Card can earn up to 2% cash back.
Pay in the Local Currency
Before reading this guide, you might have figured that paying with USD at a foreign store’s terminal is the right choice. Now that you know the ins and outs of DCC, you know that you should actually choose the local currency if you’re prompted. The exact phrasing of the question may vary by terminal, but any time you can choose to pay in the foreign currency, you’ll want to take it. The card network's conversion rate is usually lower than whatever the merchant's processor is offering, even after accounting for any foreign exchange fees.
Monitor Exchange Rate Trends
As you’d probably expect, the rate applied to your transaction is based on the date it’s processed. The problem is that exchange rates move daily, meaning that the rate you get upon settlement might be different than the rate that was current when you swiped your card. If you’re making large or recurring cross-border purchases, it's smart to track rate trends. Both Visa and Mastercard offer online rate calculators that show historical rates for a given currency pair, which can help you check the spread between the interbank rate and your card's effective rate. This can help you time certain transactions more efficiently and spot volatility before it surprises your accounting team.
How Slash Can Help You Save Money on Cross-Border Purchases
Exchange rates and foreign transaction fees are nearly unavoidable in the world of global finance. Instead of trying to find workarounds, it’s best for business owners to choose a corporate card that offers low fees and allows deeper visibility into both incoming and outgoing expenses. If you’re one of these business owners, look no further than the Slash Visa® Platinum Card.
The Slash Card can be a better cost-saving option than most competitors. Its true strength, however, is the business banking platform it’s connected to. Slash is a finance platform that gathers card payments, invoicing, flexible financing, an agentic AI assistant, and much more together on one dashboard.⁵
Slash users can spend money abroad using quite a few payment rails beyond corporate cards, including global ACH, international wire, and even stablecoins.⁴ No matter your rail of choice, you can monitor all outgoing and incoming payments on the Slash dashboard in real time. Thanks to this visibility, it’s also easier to see the impact certain exchange rates and international fees may have on your transfers. Once you get an idea of what costs how much and why, you can plan around it.
Slash also gives business owners access to the following features and perks:
- Global USD: The Slash Global USD Account is designed as an alternative for foreign founders who want access to USD without forming a US entity.³ Balances are backed by Slash’s USDSL stablecoin, which is designed to maintain a one-to-one value with the US dollar.
- High-yield treasury: Earn up to 3.79% annualized yield on idle funds with money market investments from BlackRock and Morgan Stanley, managed directly within your Slash account.⁶
- Accounting & ERP integrations: Sync transaction data with QuickBooks Online, Xero, NetSuite, or Sage Intacct to streamline reconciliation, reporting, and month-end close.
- Separate virtual accounts: Create multiple business bank accounts to silo cash flows by project, department, or client with real-time analytics across each of them.
- Multi-entity support: Slash offers multi-entity account management tools without separate logins, allowing businesses to track spending, manage accounts, and download statements across all subsidiaries in one place.
Spending money on a business trip should be fun, but it can end up being stressful if you’re dealing with unknown exchange rates and fees. Stop worrying about high foreign exchange fees and try the Slash Visa® Platinum Card out today.
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Frequently Asked Questions
Can I completely avoid credit card exchange rate fees?
You can get close, but you can’t really eliminate them entirely. Certain cards can waive the foreign transaction fee, but if they work through a network like Visa or Mastercard, they’ll still be hit with a currency conversion assessment of around 1%.
What's an FX Fee? Everything You Need to Know to Save on International Payments
Should I use a credit card or cash for international purchases?
Despite their fees, credit cards are generally the better choice for exchange rates and security. The trouble with cash is the fact that airport kiosks and hotel exchange desks often charge a commission of 3% to 8% to convert currency. A credit card with low foreign transaction fees will usually offer a better effective rate.
Cross-Border Payments: Everything You Need to Know
Do credit card exchange rates apply to online purchases from foreign merchants?
Definitely. If you buy from an international website and the transaction is processed in a foreign currency or through a foreign bank, your card issuer will use the same fees that would apply to an in-person purchase overseas. You may also run into DCC at some merchant checkouts, so be sure to watch out for prompts offering to execute the transaction in USD.
Merchant Accounts: How Card Payments Work
