PayPal Foreign Transaction Fees

The biggest differences between PayPal and Visa are their roles in the payment process as well as where and how they are used. While PayPal is an online service that secures virtual payments using end-to-end encryption, Visa is a card network that facilitates transactions by connecting consumers, banks, and merchants. PayPal is almost always used online, while Visa transactions usually involve a physical card and can be made both in-person and online.

PayPal vs. Visa: What Are the Key Differences?

Thanks to their different roles, PayPal and Visa can be used together for online transactions. By linking a Visa card to your PayPal account, you will still get Visa's advanced authorization security system and zero liability policy, plus extra security from PayPal's end-to-end encryption. Visa cardholders won't miss out on credit card rewards or network benefits when paying through PayPal, either. By linking Visa with PayPal, consumers can take advantage of all that both companies have to offer.

The major credit card foreign transaction fees range from 0% to 3% of each purchase processed internationally. The average credit card's foreign fee is roughly 1.5%. Some credit card companies do not charge foreign transaction fees on any of their cards, including Capital One, Discover and USAA. Other credit card companies charge foreign transaction fees on some, or even most, of their cards. But each of the 10 largest credit card issuers has at least one credit card with no foreign transaction fees.

Here are the foreign transaction fees by credit card company:

Issuers charge foreign transaction fees on purchases made outside the U.S., whether in-person or online. The fee is always a percentage of the total purchase amount. The reason credit card companies charge foreign transaction fees is to help pay for the costs of currency conversion in international purchases. It's essential to take a no foreign transaction fee credit card when going abroad, because those charges can quickly build up.

The Visa credit card exchange rate is the percentage that Visa applies when converting U.S. dollars to a foreign currency. Visa sets a separate exchange rate for all foreign currencies, and it can change daily. Visa also has an online exchange rate calculator to keep up to date on any rate changes.

The exchange rate is automatically applied to any foreign transaction using a Visa credit card. You will almost always receive a better exchange rate than you would if you were to convert cash at an international airport or hotel kiosk. And as a major global network, Visa cards are accepted in more than 200 countries and territories.

Here is how you can find the Visa credit card exchange rate:

1. Visit Visa's online exchange rate calculator.
2. Enter the currency amount, bank fee (foreign transaction fee), if applicable and today's date, or earlier. It is advisable to use a no foreign transaction fee credit card when making purchases abroad or from an internationally based merchant.
3. Select United States Dollar (USD) for the Card Currency.
4. Select the desired foreign transaction currency.
5. Click "Calculate Exchange Rates".
6. You should see the foreign currency converted into U.S. dollars, including any applicable foreign transaction fees.

When making foreign transactions, you should use a Visa credit card with no foreign transaction fee. Foreign transaction fees are 2-4% surcharges that are tacked on to any point-of-sale purchases outside of the United States, or purchases made through an internationally-based merchant. Capital One Venture Rewards Credit Card and Chase Sapphire Preferred® Card are a couple of the best Visa cards with a $0 foreign transaction fee.

You should also avoid any Dynamic Currency Conversion. This occurs when a foreign vendor will offer to convert the price of your purchase from the local currency into U.S. dollars. While it might appear to be a convenience, you should always decline the Dynamic Currency Conversion. The reality is, the merchant will use a rate higher than your Visa credit card exchange rate (as much as 7% higher), and pocket the difference.

There's a different Mastercard exchange rate between the U.S. dollar and approximately 150 other currencies, and they all fluctuate from day to day. You can easily see what exchange rate your transaction will have by going to Mastercard's exchange rate calculator. 

It's very simple to use. All you have to do is put in the date, currency of the merchant, transaction amount, foreign transaction fee (if applicable) and United States Dollar (USD) as your card's currency. Then click “calculate,” and you'll see the amount you're paying in USD at the bottom right. The exchange rate will be to the left of that.

Let's take a look at some of today's exchange rates for popular travel spots. These rates are current as of 06/06/18 but are subject to change as time goes on. 

Popular Mastercard exchange rates:

• Euro: 1 EUR = 1.17 USD
• Bahamian Dollar: 1 BHD = 1 USD
• Canadian Dollar: 1 CAD = 0.77 USD
• Great British Pound: 1 GBP = 1.34 USD
• Mexican Peso: 1 MXN = 0.05 USD
• Chinese Yuan Renminbi: 1CNY = 0.16 USD
• Japanese Yen: 1 JPY = 0.01 USD
• Russian Ruble: 1 RUB = 0.02 USD

Credit cards are actually the cheapest way to convert currency. But you may still be subject to a foreign transaction fee, which is an extra charge when you buy from a foreign merchant. While all Mastercards offer the same exchange rates, only some of them charge foreign transaction fees. 

You can compare no foreign fee Mastercard credit cards on WalletHub. And if you're still unsure about which to apply for, you can join WalletHub for free to get personalized credit card recommendations with high approval odds.

You can calculate an exchange rate by dividing the amount of the currency you start with by the amount of the foreign currency you'll get back. For example, if you have $100 and you get €80 back, your exchange rate would be 100 divided by 80, or 1.25 Euros per dollar. 

Most of the time, someone else will calculate the exchange for you. Credit cards automatically handle currency conversion when you make a purchase from a foreign merchant. However, understanding how exchange rates work is vital to make sure you don't get taken advantage of while traveling. There are a few more things you should know about the process, too.

Here's how to calculate exchange rates:

• Check your card network's website. 

The two worldwide card networks – Visa and Mastercard–  publish daily exchange rates from U.S. Dollars to all other major currencies. And those rates are quite a bit lower than what banks and airport kiosks charge for exchanging hard currency. In fact, using a Visa or Mastercard credit card with no foreign transaction fee can save you up to 9% on all your international spending, according to WalletHub's exchange rate study. 

Discover and Amex don't publish this information, but card network exchange rates tend to be very similar.

• Use the exchange rate formula.

The formula is: Starting Amount (Original Currency) / Ending Amount (New Currency) = Exchange Rate. For example, if you exchange 100 U.S. Dollars for 80 Euros, the exchange rate would be 1.25. But if you exchange 80 Euros for 100 U.S. Dollars, the exchange rate would be 0.8.

• Calculate the foreign currency amount.

It will generally be more useful for you to know how to calculate the amount of a foreign currency you'll get based on the exchange rate. You can do that with simple division. Divide your starting amount by the exchange rate to get the converted amount. For example, $100/1.25 = €80. 

While it's good to be conscious of exchange rates when you go abroad, using a credit card to automatically access the best conversion rates is a great way to make things simple and relatively inexpensive. 

Just make sure to avoid Dynamic Currency Conversion. That's when a foreign merchant converts your purchase total to U.S. Dollars, supposedly as a convenience but really to apply a high exchange rate and turn a bigger profit. So always pay in the local currency.