Is buying flights in foreign currency a good idea? Read on below to find out why you should always book your flights in the airline’s local currency.
Since most of my readers are from the United States, any reference to home currency will be USD and foreign currency will be AUD.
Booking Flights in Different Currency
When booking a flight on an airline outside of the United States, you will have two payment currency options—your home currency of USD or the foreign currency. In the example below, we will look at booking a flight on the Australian budget airline Jetstar.
Below you can see the airline’s website payment page for a flight from Sydney to Launceston on the island of Tasmania. Since I entered my US-based credit card information, I was given the option to pay in US dollars or Australian dollars.
By default, the US dollars option was preselected for me. But is this the best option? Let’s find out.
The first thing you will notice is that if we choose to pay in our home currency of USD, the payment will include a 4.99% commission. This is a big red flag right off the bat.
Also, take note of the AUS to USD exchange rate of 0.7607. This means that 1 Australian dollar equals around $0.76 US dollars according to FEXCO on this day in February 2019. Most travelers are aware of the exchange rates, but not to this precision.
Google will tell us if this is a fair currency conversion. Here is a screenshot of the AUD/USD exchange rate on February 6, 2019.
So which is a better exchange rate—Jetstar’s 0.7607 or Google’s 0.7103? If you think of it in terms of dollar values, the answer is obvious…
Would you rather buy one Australian dollar for $0.76 or $0.71? Obviously $0.71.
So although the exchanges rates are close, it turns out that Jetstar has a slightly unfavorable exchange rate. Also, don’t forget about that 4.99% commission that Jetstar will charge you for paying in US dollars.
On the other hand, we don’t know what exchange rate your credit card will use if we choose to pay in Australian dollars.
So which currency should we pay in?
It turns out that you should always buy flights in the foreign currency relative to your credit card.
Buying Flights in Foreign Currency
When using your credit card abroad, you always want to pay in the foreign currency relative to your credit card. As a general rule, regardless of what country you are in, you want to charge your credit card in the country’s local currency.
The main reason for this is that your credit card company will most likely give you a fair exchange rate without charging a commission.
Of course, you must make sure that you have a travel credit card that doesn’t charge foreign transaction fees. Otherwise, I don’t recommend using a credit card with foreign transaction fees overseas unless it’s a true emergency.
Anyway, to prove this point, here is my credit card transaction from the Jetstar flight where I chose to pay in the airline’s local currency. Remember, the airline is based in Australia, so they use Australian dollars.
Although I paid $96.83 AUD for the plane ticket on the airline’s website, my credit card company converted this amount to $68.02 USD. If you recall, Jetstar wanted to charge me $71.40 USD for the same flight.
So by buying the flight in the the foreign currency relative to my credit card, I saved myself $3.38. Now that might not seem like a lot of money, but if you are a budget traveler like me, every penny counts.
Always Pay in Local Currency When Abroad
In addition to flights, you should always pay in the local currency when abroad. This goes for lodging, food, transportation, and every other credit card purchase abroad.
The only rule you need to remember is that when you’re abroad, pay in the country’s local currency. Said another way, when you have the option overseas, charge your credit card in the foreign currency (not USD).
If you have any question about how to pay with your credit card abroad, let me know in the comments.