The U.S. dollar has been losing strength abroad, slipping from 122.63 in January 2025 to 114.57 in July on the Federal Reserve’s Real Broad Dollar Index. For American travelers, that means less buying power overseas. But exchange rates are only part of the problem. The bigger hit often comes from how you pay.
Whether it’s an ATM withdrawal at the airport or tapping a card at a café, small payment choices can add up to significant losses. Fees for dynamic currency conversion, foreign transactions, and ATM commissions quietly inflate costs, often without the you noticing until the statement arrives.
A Costly Mix of Card Fees and Conversions
Banks and payment processors typically add a 1% to 3% foreign transaction fee on purchases made outside the United States. In addition, merchants and ATMs frequently offer an option to “pay in U.S. dollars” through a process known as dynamic currency conversion (DCC).
DCC allows the terminal to set the exchange rate, often including hidden markups of 6% or more. Paying in local currency almost always results in a lower charge, even if your bank applies a standard fee.
Real-world examples illustrate the impact. During a trip to Portugal, one traveler withdrew 150 euros from an airport ATM. Based on the exchange rate at the time, the withdrawal should have cost about $160. Instead, it came through at $185: a markup of nearly 24%. Later, when using other bank ATMs with lower commissions, the same withdrawal carried less than a 9% markup.
How Fees Change the Price of Everyday Purchases
Deutsche Bank’s 2025 Mapping the World’s Prices report shows how quickly fees add up on small purchases. In Zurich, a cappuccino priced at $6.77 climbs to $6.97 with a standard 3% card fee. Choosing to pay in U.S. dollars instead of Swiss francs pushes the price to $7.18.
Similar increases appear in other cities. In London, a $5.19 coffee becomes $5.35 with a card fee and $5.50 with dynamic currency conversion. In Paris, a $4.64 cappuccino ends up at $4.78 or $4.92, depending on how the payment is processed. These small adjustments may not stand out in the moment, but over the course of a trip they quietly raise the cost of daily spending.
Foreign Transaction Fees Add Up Quickly
Foreign transaction fees are rarely displayed at checkout. Instead, they appear later on billing statements, leaving many travelers unaware. A 3% surcharge on two $5 coffees per day adds about $2.10 per week. Over a longer trip, the accumulated costs become substantial.
The best way to avoid this is to use a card that explicitly states “no foreign transaction fees.” Most major travel cards include this feature, but many standard debit and credit cards do not.
Strategies to Minimize Travel Payment Costs
Travelers can reduce unnecessary charges with a few simple habits:
- Select local currency at terminals and ATMs to avoid dynamic currency conversion.
- Use no-foreign-fee cards for purchases abroad.
- Seek out banks that reimburse ATM fees or participate in global alliances.
- Rely on multi-currency apps like Wise or Revolut for transparent conversion rates.
- Limit ATM withdrawals by taking out larger sums less often.
The Takeaway
Travel has enough built-in expenses without letting banks and payment networks take an extra slice. Those quiet add-ons aren’t a travel inevitability, they’re a choice. When you know how to spot them, you control the outcome.
A cappuccino, a taxi ride, or a museum ticket should cost what it says on the board, not what a machine decides after layering in hidden fees. Protecting your budget abroad doesn’t require complicated tricks, just a habit of paying the smarter way.
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