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Recently I had to pay for a hotel in a foreign country using credit card, and the guy at the hotel asked me if I wanted the bill to be paid in the local currency or in US dollars. I didn't even know I had this option.

Which currency should I have chosen if I wanted to pay less? What are the pros and cons of paying in each currency?

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I'm sure we had a question on the site which answers this, but I can't seem to find it. Short version: use local currency whenever possible. –  mindcorrosive Aug 17 '12 at 13:26
    
Are you a US citizen? I ask because it's unclear whether they were US dollars, you were offered this option because your card was from a country which uses US dollars, or US dollars is some kind of universal option. It could be that you can pay in either the local currency or the currency of your credit card. Knowing which could help me clarify the wording in the question. If you have no idea which then please add that info too because it's also useful and interesting. (-: –  hippietrail Aug 18 '12 at 8:31
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@hippietrail my country currency is not US dollars. The guy offered me this option because US dollars are a universal option. –  hooray Aug 19 '12 at 4:29
    
related: money.stackexchange.com/q/10837/13495 –  Kate Gregory Jun 16 at 14:29

5 Answers 5

up vote 25 down vote accepted

If you pay by Dollar (or home currency) The hotel will add a charge for this, hence you will be paying more.

If you pay by local currency the exchange rate will be decided by the credit card company or bank. These exchange rates are much better than the hotel rates.

Check this Visa page for more information regarding this service for Visa holders. AFAIK, Other companies have similar services so this applies to all other credit cards.

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FYI, this same thing applies with paypal. If for some reason you're paying something in euros, you should have your credit card do the conversation, not paypal –  user606723 Aug 17 '12 at 19:25
    
I work in a hostel (not a hotel) in Sydney Australia, and of the few cards that trigger a choice of currencies for us to charge in, we never add a charge when the custom asks to pay in their home currency. –  hippietrail Aug 18 '12 at 8:40
    
I think you work at a decent hostel then.. unfortunately most Hotels do charge for this :( –  MeNoTalk Aug 18 '12 at 8:47
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Direct currency conversion is offered by the hotels bank rather than he cardholders bank (or the hotel) –  WW. Aug 19 '12 at 4:29

If the country you are traveling through faces major inflation of its currency, it might be worth paying in local currency (if they allow you to). At the end of the eighties I was in a south American country with huge inflation rates where once people got their salaries they rushed to the shop to spend it all. The same amount could just drop in value by tens of percentage points within a day. I am not so sure if these hyperinflation rates still occur, but it is worth considering when deciding between paying in the local currency or your home currency.

Personally I apply the "when in Rome do as the Romans"-dogma. Meaning that I choose to pay in the local currency. There is no logic behind this choice, other then to keep things simple. I don't want to account in two currencies, at least until my final accounting where I sum up what a trip cost me in total.

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If you pay in local currency, you control the exchange rate, or at least international banking rules do.

If you pay in dollars, the shop owner applies whatever exchange rate is best for him. This is usually not in your favor.

If you know the official exchange rate at the time of your transaction and are able to make quick comparisons in both currencies, you can ask both prices and choose the best one for you.

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Note that credit card companies also charge extra for foreign currency payments, either explicitly or implicitly through the exchange rate. –  Michael Borgwardt Aug 17 '12 at 14:08

The big advantage of paying in your own currency is that you know the exact amount in your currency you were charged, and you can do your expense report right away. You don't have to wait for your statement or do any currency conversions on the expense report. Since you're not spending your own money in this case, it seems attractive. I believe it's offered as a "service" and a "convenience" for business travellers. Like many things hotels offer to business travellers, it's a good revenue source for the hotel. Think about car rental places that will fill the tank for you as a convenient service :-)

I doubt very much you would save money paying in your own currency. If the early or easier access to the number isn't worth anything to you, don't take this option. If you are familiar with the exchange rate, you could ask them what rate they'll use to decide whether to take it or not, but I would be very surprised to hear that it ever saved anyone any money: that's not why they offer it.

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Sorry, it was not clear in my question but US dollars is not my local currency. Although your principle still applies to my scenario. It is easy for me to have an idea on how much I'm paying in dollars than in the hotel's currency. –  hooray Aug 19 '12 at 4:38

As others have noted, you are almost always better off paying in local currency as the credit card company's exchange rate will be at least as good as the hotels.

The only possible exception is if your booking specified the price in dollars. In this (rather rare) scenario, in order to pay in local currency, the hotel will convert your price into local currency at some exchange rate, possibly an unfavorable one and then the CC company converts it back into dollars (or your home currency).

I've had something similar happen once (in Prague) where the price was quoted in EUR but they could only accept local currency for CC payments. They did however use a fair exchange rate. I could also have just payed in EUR if I had had cash which I didn't. If they had accepted EUR payments via CC that would have been better given the circumstances.

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In some parts of the world it's not at all rare to specify the price in an "international" currency rather than the local currency. In Eastern Europe it's very common to quote prices in Euro in non-Euro countries for instance. –  hippietrail Aug 18 '12 at 8:43

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