What is the credit card conversion rate, and why does it matter?

Credit card conversion rates, also known as foreign transaction fees, are the charges applicable to transactions made in a currency other than the card’s base currency. Usually, credit card providers charge between 1% to 3.5% of the transaction amount on foreign transactions. These charges vary based on the card issuer and networks (like Visa, Mastercard, etc.).

How do card conversion rates work?

When you make a purchase in a foreign currency using your credit card, the exchange rate determines how much you'll pay in your home currency.

Let’s understand with an example. If you buy something for $100, and your bank charges you a conversion fee of 1%, here is what you will have to pay:

• Suppose the exchange rate is 1 USD = ₹85
• $100 = ₹8,500
• A 1% conversion rate would be ₹85

So this transaction would cost you ₹8,585.

Why does it matter?

Being aware of conversion rates and fees is important to avoid any unexpected costs, and using credit cards wisely. Travel credit cards often waive these charges, so you can opt for a travel card if you are a frequent traveler.