How do credit cards exchange rates work?  Why are you charged for these exchange rates?  First of all credit cards exchange rates are the amount of money you are going to be charged when you use the card in a foreign city.  You recently travelled to France from the UK.  In the store you purchased an item in Francs.  For the credit card to actually charge you they need to figure out what the exchange rate is for that purpose.  Some companies will charge you a fee for this rate while you are in the store.  In other words the store you purchased the item for has a machine and that machine is going to charge the store for taking your card.  This charge they incur plus the fact that your card is set for British Pounds means they need to figure out what they need to get from the credit card company in Francs.

This is the credit cards exchange rate.  The rate will vary depending on the current economy of the place you visit.  It will also depend on the day you were there and purchased something.  The credit card companies are usually going to have the best exchange rate unless the merchant also has a fee.  The credit card company offers a 1 to 2% exchange rate for foreign purchases where the merchant tend to have a 5% fee.  It is important before you use your card in another country to understand these credit cards exchange rates. 

Many consumers have been surprised when they arrive home and see their credit card balance to find it so high after a vacation because of the exchange rates they didn’t know anything about from the merchant or credit card companies.  You need to ask the merchant if they convert the currency and the rate.  You also need to read the terms and conditions on the credit card company policy or ask them about the exchange rate. These rates are different than converting pounds to francs in a bank.  They are also different from the exchange rate and fees you incur if you decide to do a cash advance on an ATM while you are in another country.  The banks in the other country automatically offer their currency for a cash advance and in this case you would spend double or triple the exchange rate for this type of method.

It is best to just use the card or convert the cash at a bank before the trip to save yourself unnecessary fees.  There are some merchants in the other countries that may not take your credit card so this is something to consider when talking about credit cards exchange rates as well.  It is important that you know the merchant you are shopping with as well as to carry local currency just in case they do not take credit cards.  You could be in a pit of a problem spot otherwise or incur fees that you never knew existed.