Where Does Your Money Go When You Pay Abroad? Exchange Rates, Card Fees and DCC

Have you ever added up a trip and found money missing?

I have.

My first long trip was Vienna, Budapest, Kraków and Prague. Four cities, four currencies: euros, forints, złoty and korunas. I stayed in hostels and changed cities every couple of days.

When I got home, I sat down to do the math. I knew roughly what I had spent: hostels, food, bus tickets. I had a number in my head.

My accounts had a different number.

The gap wasn’t huge. But it was there, and I couldn’t explain it. Somewhere between four currencies, part of my money had disappeared.

“Beware of little expenses; a small leak will sink a great ship.”

— Benjamin Franklin, The Way to Wealth (1758)

It took me years to find every leak. Today I move between countries for one, three or six months at a time, and I still see the same leaks everywhere. The only difference is that now I know where they are.

Three places your money leaks

The card’s exchange rate

When you pay by card abroad, the transaction happens in the local currency. Your bank then converts it into the currency of your account.

That conversion doesn’t use the rate you see on the news. Your bank takes the card network’s rate and adds its own margin on top. Some banks show it as a separate line on your statement. Others bury it inside the rate, where you’ll never spot it.

On one coffee, the difference is nothing. Over a year of coffees, groceries and rent, it’s the same margin, again and again.

These days I use my Turkish bank cards alongside an international platform like Wise. Services like this start from the mid-market rate — the midpoint between the buy and sell rates — and show their fee separately. Which one is cheaper depends on the country and the amount. The real win is seeing what you pay.

ATM fees

In Belgrade, I went to withdraw cash and the ATM showed me a fee before it gave me anything.

With a foreign card, you can pay twice at an ATM: once to the bank that owns the machine, once to your own bank. And if the ATM offers to calculate the amount in your home currency, a third door opens.

DCC: “Would you like to pay in your home currency?”

I haven’t been to a single country where nobody asked me this. At a restaurant’s card terminal, at a hotel reception, on an ATM screen.

The question sounds innocent. Polite, even. Seeing the price in a currency you know feels comfortable.

It’s called Dynamic Currency Conversion, or DCC. When you say yes, the conversion isn’t done by your bank anymore. It’s done by a company the shop or the ATM works with, and that company sets the rate.

How much does that comfort cost? According to a study cited by researchers at Utrecht University, the average cost of DCC is 7.6%. Paying in the local currency usually costs between 1.5% and 3%. The convenient option costs more than twice as much.

Under Visa and Mastercard rules, the choice is yours: the merchant can’t decide for you, and DCC can’t be applied by default. In the European Union, a DCC offer must also show how much you pay above the European Central Bank’s rate, as a percentage.

But who designs the screen? Who decides where the buttons go? Not you. The options are arranged so that, with a queue behind you, pressing the wrong one is very easy.

A year in numbers

Let’s not use my own numbers. Let’s use a round example instead. Real rates depend on your card, your bank and the country; the point is to see the size of it.

Say you spend 1,000 units a month. That’s 12,000 units a year.

• Your card’s exchange margin is 2%: 12,000 × 0.02 = 240 units
• You withdraw cash twice a month and pay 5 units in fees each time: 24 × 5 = 120 units
• You say yes to DCC on just one in ten payments and pay 5% extra: 1,200 × 0.05 = 60 units

240 + 120 + 60 = 420 units.

That’s almost half a month of living, gone, without buying a single thing. And that’s before the exchange rate itself moves — which is a story for another post.

What I do now

I always choose the local currency. At card terminals and at ATMs. If a cashier asks, I say “local currency.” If a screen asks, I read it twice before I press anything.

I give each card a job. Day-to-day spending goes on the one that shows its fee up front; the other is my backup. If one card turns out expensive in a country, I switch.

I withdraw cash rarely, and in bigger amounts. When every withdrawal has a fixed fee, a few large withdrawals cost less than many small ones. If an ATM shows a fee, I cancel and try another bank’s machine.

I stay longer. When you stay somewhere for one to six months, you stop living like a tourist and your spending settles into a rhythm. Working from home all the time kills my motivation — I need change — so cafés are a kind of office for me. I keep trying new ones, always looking for quiet places with comfortable seats. Some days I eat out, some days I cook. When spending repeats like this, it’s much easier to see what each card and each ATM is doing to you.

I record every expense at that day’s rate. If you convert last month’s rent at today’s rate, you never see what it really cost you. That’s why, when I built Nomad Budget, I insisted that every entry is stored at the exchange rate of the day it was paid.

Today I can name the gap I couldn’t explain at the end of my first trip: the card’s margin, the ATM fee, and that one question I kept saying yes to. None of them is big on its own. Together, they’re half a month of life.

I wish you trips where the only thing you lose is track of time.

Sources

• Visa, Dynamic Currency Conversion
• Mastercard, Dynamic Currency Conversion Guide (2025)
• European Union, Regulation (EU) 2019/518
• Dirk Gerritsen, Bora Lancee, Coen Rigtering (Utrecht University), Travelling abroad? Don’t be tempted to pay your way using your home currency, The Conversation, 2023