Foreign Credit Card Transactions: Always Opt to Pay in CHF

Finance, Taxes, Banking, Insurance and Retirement
1

I was researching foreign credit card transaction fees. In my case, it is for using a USA-issued Visa card that bills in US Dollars $, for transactions in Switzerland using CHF. (I believe the idea here applies to any credit card that bills in a currency other than Swiss Franc and therefore requires currency exchange.)

Also, this is for a credit card that explicitly states it charges no “foreign transaction fees”. You should not be using a credit card for foreign transactions, which charges a “foreign transaction fee”! Speaking of this, exchange rates and currency conversion administrative fees are not included in “foreign transaction fees”.

On to my main point: It is best always to run the credit card transaction in the foreign currency (CHF) rather than in your card’s billing currency ($USD for me). That’s the little message you get from the credit card scanner device, like “Pay in USD $105.23 or CHF 100 ?” You always want to pick CHF here, and never USD $ (or whatever your card’s billing currency is). It may be awfully convenient for the total to show up in your native billing currency (USD), and while it tempts you to select the currency most familiar to you … don’t do that, because selecting the billing currency USD $105.23 here will result in paying 3-15% more fees on the currency exchange involved in that transaction, than if you had chosen the foreign currency CHF.

By selecting the foreign currency CHF (good!), your currency conversion is performed by the card organization (Visa or MasterCard). You want this. If you instead were to select the billing currency (USD for me) – bad! – then the merchant’s point-of-sale system performs the currency exchange. And point-of-sale systems tend to offer a much worse exchange rate to create profit for itself and sometimes for the merchant.

On top of whatever raw exchange rate the transaction runs at, the card organization (Visa/MC) will add in around a 1% currency conversion charge, and the bank that issued your credit card will add in around a 2% administrative fee. And if you are using a card with a “foreign transaction fee”, that will get added in as well but again don’t use a card with a foreign transaction fee!

One last thing, apparently the MasterCard card organization gets slightly better USD → CHF exchange rates than the Visa card organization. For example, using the date of September 26th 2022, Visa exchanges CHF 100 for $102.7220, while MasterCard will exchange CHF 100 for $102.1566.

I found a lot of great information about this here if anybody cares:

Visa vs. MasterCard: Who gives better exchange rates?

Overseas credit card use: Should you pay in SGD or in foreign currency?

2
why don't you use a credit/debit cart like Revolut that let you pay/deal with local currency? It is the best way if you want to know what you really have to pay.

Revolut is just an exemple, there are others.

3
Well, for me, I don't personally hold or generate any currency in CHF. It's all in USD $.

So for me, in order to pay expenses in Switzerland, my options are either to pay with a "foreign" credit card that bills in US Dollars, and the currency exchange happens via the credit card company; or, to transfer $ currency from a US bank account to CHF in a Swiss bank account, and the currency exchange happens via the banks.

I am still researching which method incurs less expense. In reality, I will be using a blend of the two methods, I'm sure, but I like to know all the details and I wanted to present the topic above, since I've often been absolutely perplexed when a credit card reader asks me if I want to pay in CHF or USD. Now i know, with my foreing credit card, always to select CHF.

4
Did you check revolut?

5
Your thread applies to all currencies. I'd change the title to "Foreign Credit Card Transactions: Always Opt to Pay in local currency "

6
The way I do this is with Wise (formerly Transferwise):

Through Wise I have a US banking Account Number and Routing Number to which all my US Dollar assets are deposited, I make fairly low-cost conversions from USD to CHF when the market feels right, or I feel like it, or I need it, I spend CHF in Switzerland from CHF already in my possession that's already been converted without any additional fees or uncertainty, I use the same card to make USD purchases (often online) without any additional fees or uncertainty, If needed, I could convert money to GBP or EUR and use those without any additional fees or uncertainty.

At least in my book it removes a lot of the complications you're trying to address, it's what I would do and is what I have done.

Revolut, which I don't use, also appears popular with EFers.

7
You can also get the new Visa from Migros Bank/Cumulus that applies no currenc conversion fees for transactions abroad. They will still cheat a little onexchanhe rate but at least the fees are gone.

8
Wise +1

Spent a month in Canada and just used Wise. I was never ever asked which currency to pay with.

9
Or just use revolut/wise and not worry about any of this...

10
Sometimes Revolut does not work, for example using it as a hold for a car rental or when checking into a hotel. So indeed, if using a credit card, always pay in the foreign currency and let the cc company convert it to your billing currency.

Bearing in mind many firms, such as AMEX, charge a 3% fee, so what I do is use the cc for the hold, then settle with my Revolut.

11
Thank you for the advice, it sounds like it can simplify things.

Regarding the point above, I am not clear: Do you also need a second bank account, in Switzerland, for this system to work? For example, you decide to use Wise to exchange $500 USD that you have sitting in your US Bank Account, into CHF, because the exchange rate is good. Where exactly does the exchanged CHF end up? Can you turn around with the Wise card and pull the CHF out of a Swiss ATM?

That would be nice if it didn't require a second account in Switzerland.

12
You don’t. Wise gives you an US account number with all the routing codes. You would do a bank transfer from your US account to the Wise account.

Once you have it in Wise you have the choice of converting it to CHF or leaving it in dollars.

At the moment on my Wise account I have funds in CHF, GBP, EUR and CAD. When I spend money Wise takes it from the relevant currency and if there is none or not enough it takes the remainder from CHF converting at their exchange rate.

13
I had a case once at a hotel in Italy where the reception took my card and pressed the "pay in chf" option for me. I didn't notice until I got the bill, so too late to do anything. From now I am always very conscious of this, especially with hand-held terminals.-

14
@goffredo this is exactly what I do as well.

I get USD in America deposited to my Wise account, convert some (or all or none, as I see fit) to CHF. Then I use the Wise card in Switzerland like a normal debit card, or push the money into my Swiss banking account.

Out of curiosity, any reason you're avoiding using a Swiss bank account? Assuming you have some residency here, except for all the extra paperwork for an American, Swiss banking is so much better than US banking.

15
It sometimes seems the merchant is trying to be helpful by pressing all the buttons for you. In reality they want you to pay in your home currency as they get a small cut of the commission. Never let them do this for you.

On two occasions where they did do this, I insisted they reverse the transaction. They both "apologised" and insisted it was impossible. I said if they don't I'll call the credit card company right now to put a hold on the transaction. They both then "magically" found a way to reverse the transaction!

16
I guess the only reason I'm avoiding a Swiss bank account is to reduce the amount of stuff I have to deal with. All of the money I currently hold and generate is in US Dollars, and this will continue to be the case for many years. So no matter what, to have money for goods and services in Switzerland, I will have to pay a fee for foreign exchange and do USD to CHF.

I will not be making any major purchases in Switzerland for stuff like houses, cars, etc. So having a Swiss bank account really doesn't make sense for me at this time.

Therefore, I applied for a Revolut card, as @Spinal and @StarDeMer kindly suggest. And Revolut promptly took passport pictures, drivers license pictures, and all my personal information and moments later told me to piss right off: "I regret to inform you that we are no longer able to offer you our services and that your Revolut account has been deactivated." Apparently I'm an international financial terrorist threat or they racially profiled me or whatever. It's funny because my finances and credit are squeaky clean and I'm as square as can be ... perfect for Switzerland right? But apparently my evil twin springs into action when I'm asleep and performs unspeakable international financial crimes.

So then I signed up for Wise as some other posters had suggested, and they gave me no trouble. I'm happy I didn't end up spending money for Revolut.