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Currency conversion fees on debit cards

Hello all,
I will use a Schwab bank debit card in Italy as I am not charged ATM fees. I was told last night that I would be charged currently conversion fees. They can be as high as 1%. Reading recent forum posts I read vendors in Italy are requesting payment in cash more and more. Hence, I will need to use my ATM card perhaps frequently. Does anyone have tips on how to avoid/reduce the currently conversion fees on a debit card? Thank you!

Posted by
1951 posts

When you say * vendors " who are you referring to - department stores, shops, restaurants, landlords ...

Posted by
7566 posts

Let me clarify a bit exactly which Schwab account you are talking about. If it is an investor checking account debit card there are no foreign transaction fees or ATM fees. Do you have a different type of account than this?

I am never charged any currency conversion fees on my Schwab Investor Checking Debit Card. Who are you getting your information from?

Posted by
22892 posts

You are trying to avoid 1 %? That is pennies. Fees come in a variety of ways. The first fee encountered MIGHT Be a user fee for using the ATM. Common in the US for what is call out-of-network user fee but historically not charged in Europe. There are reports of this user ATM fee starting to show up more often in Europe. Look for an ATM that doesn't charge it. The second fee that is charge is the currency conversion fee charged by the network -- Cirrus or Plus -- less than 1 % above the Interbank rate and embedded in the exchange rate. Cannot be avoided. Everyone pays it. Even with that fee, still cheaper than any other option.

After that all of the fees charged will be determined and fully disclosed by your bank or card insurer. Only avoided by changing card insurer. A note of caution -- the are reports of offers to do the transaction in all US dollars -- called dynamic conversion. That can add additional costs. Just say no. This will be the cheapest part of your trip.

My personal preference is use only bank owned ATMs, attached to banks, during open hours.

Posted by
5 posts

I was reading on the internet last night that VISA can charge a 1% fee. It is part of the exchange fee that is part of the getting euros out of an European bank in Europe. I read some credit unions do not change the currently exchange fees with their debit cards. I spoke with the Schwab bank employee last night (through the Schwab main number) and was told there could be currency conversion fees and that Schwab will not reimburse those.

Posted by
1980 posts

You may be confusing currency conversion fees when using your visa for purchases, not withdrawing from the ATM. When you make a purchase, the vendor will ask: Euros or dollars? Always choose Euros. This avoids the currency conversion fee for purchases.

I think things may be changing globally with more places preferring contactless payments due to Covid. Make sure whatever card you bring offers that option.

Posted by
22892 posts

That is absolutely correct, Suzie. It is generally less than one percent. Technically it is the networks' fee but each network is owned by the respective credit card company. It is the difference between the spot Interbank rate and the charge presented to the credit card company. Someone has to pay for that service and convenience. The reason Schwab will not reimburse is because the fee is not id or disclosed. All other fees are disclosed. Goes back to a class action lawsuit in the 70s.

PS What travel4fun is describing is totally different and commonly referred to as dynamic conversion. I have not seen it on ATMs but others have reported it as an option to complete the transaction in dollars. Just say NO !!

PPS -- The < 1 % network fee will also be charged when using the credit card. Cost of doing business.

Posted by
18864 posts

ATM fees are the charge that foreign ATMs charge you to use their machine. They are common in the US; I have never been charged an ATM fee in Europe.

I almost switched my stock account to Swab years ago because they told me they do not charge a "currency conversion fee" for foreign transactions. I don't know if that is still true. I now have an investment account debit card with Wells Fargo, which charges my $5 per ATM transaction in Europe. If I convert $500 at the ATM, that's 1%.

If you withdraw euro from an ATM in Europe today, you will have to pay for the difference in currency value. That is, to get 100€ today, you will have to give them $107.95. That is just due to the difference in international value of the currencies. To that rate, various institutions add their own fees. The "Network", collectively Visa, MasterCard, Plus, Star. et al) charge 1%, about half for currency conversion, half to servicing the account - i.e., physically paying the ATM owner in euro and collecting from your bank in $.. Credit unions and small banks often just pay the 1% Network fee; big banks, like Bank of America pay the network in US$, then charge you a fee for the service, which can be as high as 3%.

If you use a credit card or debit card to make a purchase in Europe, your bank will likely charge you 3% on top of the currency difference. So you are probably better off paying in euro you get from an ATM at 1%.

Also, be aware of something called Dynamic Currency Conversion, where the vendor (restaurant, hotel, etc) offers to charge you in US dollars. They will use a currency conversion rate very favorable to them (not to you). Then, since it is still a foreign transaction, your bank will charge you 3% anyway. You'll end up paying currency conversion fees twice. I had never seen DCC at an ATM until I used a Reisebank ATM in Würzburg. It wasn't obvious it was DCC; they tried to sneak it in surreptitiously.

Posted by
1558 posts

I read vendors in Italy are requesting payment in cash more and more.

Be careful about cash only vendors. It is 2022 not 1972. If you are in a very small out of the tourist lane village in Italy, perhaps you will find a few cash only, but they are rare. Make it a habit to ask about CC before ordering or purchasing.

Posted by
2625 posts

I do not know what the hit is now, I will be checking my Schwab account transactions later this week when I get home. And have not used it in 2 1/2 years. Historically, the additional fee over that day’s exchange rate had been around .3 percent, which is negligible. My CapOne was more like .6 to .7 percent above the exchange rate on currency withdrawals. My credit cards - CapOne, TD - used to be at the exchange rate, no fee mark-up, making them a better deal than using cash, especially as we get 1.5 or more percent back.

To note, Spanish owned banks were, and probably still are, charging a service fee at their ATMs. I specifically remember avoiding this using a Deutsche Bank branch’s ATM in Spain. I had heard this may also be true in Italy.

Posted by
753 posts

An answer to a question not asked, but the generally accepted advice is to only use a credit card abroad for purchases, preferably a CC with no foreign transaction fee. You are more protected against fraud with your CC than when using a debit card for purchases (same here in the US).

FYI the only time I had a fraud issue from use of a debit card in Europe involved a card tied to a Fidelity cash management account. I used this card only for cash withdrawals at local bank ATMs located inside of bank lobbies. Still, my card number was copied or skimmed, and about 6 weeks after my return home a withdrawal from an ATM in Indonesia happened, and I have fraud alerts, and I called asap and Fidelity took care of it. I have never had a CC fraud issue for any usage in Europe that I was ever aware of...whenever possible in Europe, I use Apple Pay through my IPhone for transactions, and that adds a layer of protection because your CC card number is never revealed or exposed.

Ever since the debit card fraud, when I travel abroad and plan to use the debit card for any cash withdrawals, I make sure I only have a small balance in the account to limit any fraud that might occur while I am abroad. Today I am far less likely to use ATMs for cash withdrawals while abroad, relying more on credit cards and Apple Pay.

Posted by
7566 posts

Lets think about this in real terms. I go to an ATM and I withdraw 200 euros. My card (Schwab) does not charge foreign transaction fees and refunds any ATM fees that may be charged by a bank. It then uses its system to charge my account in dollars. I don't believe there is a 1% currency conversion fee and their website supports this, but for the sake of argument, lets use that number and see what the cost is. The cost would be a whopping 2 euros. Is this really something to worry about? If your whole trip hinges on saving 2 euros then I think you have set your budget too low.

Posted by
2526 posts

There’s a prior thread about gaining cash in Europe, “AAA packing class had a few surprises…” as well as this thread. The AAA teacher strongly recommended against using a debit card, rather just use a credit card for a cash advance. Here’s a real world example given the credit card surely utilized by many Rickniks and results in a charge of the greater of 5% or $10.00 USD of the transaction PLUS interest (currently 25.49%) and not counting any other fees.

Alternatively, use a no foreign transaction fee debit card often mentioned on the Travel Forum, with unlimited ATM fee rebates. This is the most economical way to gain foreign currency for a retail customer in my experience and knowledge base. Keep a small amount in the associated checking account if you wish and lock the debit card except when using it for a cash withdrawal from a bank ATM. Also, sign up for transaction alerts. While my debit card was compromised years ago and a small amount stolen, I lost $0.00 USD then and to date.

Another approach is to order foreign currency in advance of your trip. For example, the euro exchange rate today with a large national bank is $1.1295 USD, not counting any fees versus the VISA system rate of $1.0855 USD. This guarantees such expense in advance of a trip. If unable to find a functioning bank ATM at your arrival airport (never has happened to me), then exchange a small amount cash for the local currency at a currency exchange booth.