I Saved $20,000 Just Using this Strategy.

See How This Strategy Works With This Simple Comparison of the Same Transaction with Three Different Exchange Rates

“A wise person should have money in their heads, but not in their hearts.”
 Jonathan Swift

Super Simple Strategy to Avoid International Foreign Exchange Fees

Say No The ¨Dynamic¨ Currency Conversion Rate

Note: Read my other posts on currency exchange fees and this post. 

I have composed the following post to:

  • Show an example of how much you can save by avoiding the dynamic conversion rate.
  • Clarify how to avoid the dynamic conversion rate.

Many places overseas claim they do not charge a commission on foreign currency transactions. However, unbeknownst to many travelers, they make money by exchanging currencies at an unfavorable exchange rate.

Two standard exchange rates are charged to travelers on foreign currency transactions: the Modified Interbank Rate and the Dynamic Conversion rate.

  • The interbank rate is the standard exchange rate charged between banks for foreign currency exchange. Banks generally charge around a one percent commission for ATM withdrawals and Credit Card purchases if you do not authorize them to do the foreign exchange transition. You can find the current interbank rate on large foreign websites like oanda.com and xe.com.you.
  • The dynamic conversion rate is a fancy way to say an exchange rate that includes a significant hidden commission. The vendor can determine the commission rate included in the transaction, but it normally varies between 5 and 8%. Consumers automatically get the dynamic conversion rate on most transactions using Western Union, foreign currency kiosks and windows, and hotels. You will usually get the dynamic rate on transactions using ATMs, Pay Pal, and merchants if you allow them to make the conversion to your home currency for you. (ATMs, Pay Pal, and merchants will ask you at the point of sale (usually electronically) if you want them to make the currency conversion for you. Always say no, or else you’ll get the dynamic conversion rate)

You will almost always see the exchange rate before you make a transaction at ATMs, Pay Pal, kiosks, hotels, and merchants, but most travelers ignore the rate. You can easily compare the exchange rate shown where you make the transaction and the interbank rate on xe.com or oanda.com. (Remember, even ATMs and credit card transactions will have a small commission, usually between 1 and 2%, built into the exchange).

You can avoid the dynamic conversion rate by always making ATM withdrawals and credit card purchases in the local currency and never giving ATM or Credit Card companies permission to convert to your home currency’s currency for you.

To show the impact the dynamic conversation rate can make on your transactions. I have included a comparison below between three transactions involving an exchange between the Mexican peso and US dollars. The total transaction is 6000 Mexican pesos.

  • The first transaction is for an ATM or credit card without fees. You can find a discussion of ATM and credit card fees in my previous posts on ATMs and credit cards. (Note: getting a credit card without foreign transaction fees is easy. Getting an ATM card without a foreign transaction fee is not as easy. The fee is usually around 3%).
  • The second transaction is with a credit card or ATM with a 3% foreign transaction fee.
  • The final transaction involves using the dynamic conversion rate.

A Comparison of Currency Conversion Rates

Here is how much you will pay for 6000 pesos in US dollars, assuming that the interbank conversion rate (available at oanda.com or xe.com) is 20 Mexican pesos to a dollar. (The interbank conversion rate for the last couple of years has hovered around 20 pesos to a US dollar):

Scenario One: A Transaction with the Modified Interbank Rate

You are making a credit or ATM card transaction, and: 1) your credit or ATM card doesn’t have a foreign exchange fee, and 2) you decline the option to convert the purchase back into US dollars.

  • The interbank rate: 6000/20= $300.00 +
  • 1.5% difference between bank’s consumer exchange rate and the interbank rate= 90 pesos (6000x.015)/20 pesos per dollar= $4.50=

Total: $304.50

(If you make an ATM withdrawal, you will also have to pay a fee for using the machine. In Mexico, these fees vary depending on the ATM between 35 pesos, $1.75, and 175 pesos, $8.75)

Scenario Two: A Transaction Using the Modified Interbank Rate With a Foreign Transaction Fee

You are making an ATM or Credit Card transaction, your ATM or Credit Card has a 3% foreign transaction fee, and you decline the option to do the conversion for you.

  • The interbank rate: 6000/20= $300 +
  • 1.5% difference between your transaction and the interbank rate= 90 pesos (6000x.015)/20= $4.50 +
  • 3% foreign exchange fee- 180 pesos (6000x.03)/19= $9.00

Total: $ 312.50

(If you make an ATM withdrawal, you will also have to pay a fee for using the machine. In Mexico, these fees vary depending on the ATM between 35 pesos, $1.75, and 175 pesos, $8.75)

Scenario Three: A Transaction Using the Dynamic Conversion Fee

You are making a transaction at

  • An exchange kiosk, hotel, Western Union, or
  • You accept the option to allow the conversion back to US dollars offered by the ATM or at the time of your credit card purchase (In Europe and Canada, many vendors will offer to convert back to US dollars (or your home currency) for you. I have never seen this option offered by a vendor in Mexico).
  • The interbank rate: 6000/20= $300 +
  • The difference between the dynamic conversion and interbank rate: 300 to 480 pesos (6000x times 05= 300 pesos or 6000 pesos times .08= 480 pesos)/20= $15-24
  • The foreign transaction fee is included in this transaction = $0

Total withdrawal is $315-$324

(If you make an ATM withdrawal, you will also have to pay a fee for using the machine. In Mexico, these fees vary depending on the ATM between 35 pesos, $1.75, and 175 pesos, $8.75)

Another Simple Tip: Avoid Any ATMs Like These

ANOTHER SIMPLE STRATEGY TO AVOID INTERNATIONAL FOREIGN EXCHANGE FEES Don't use ATMs like this in Europe near tourist sites. Usually, they charge a 7% to 14% commission. (Similar ATMs exist in Mexican beach resorts and advertise that they disperse US dollars).
Don’t use ATMs like this in Europe near tourist sites that make US dollar-based transactions. Usually, they charge a 7% to 14% commission. (Similar ATMs exist in Mexican beach resorts and advertise that they disperse US dollars).


In the transaction above, you pay between $4 and $24, depending on how you pay for the transaction.  

Since 2011, I have lived and traveled outside the US for over nine years. During that time, I spent around $300,000 for purchases and ATM withdrawals in currencies other than the US dollar (my home currency). By ensuring that all these transactions used the modified interbank rate rather than the dynamic conversion rate (and avoiding foreign transaction fees), I saved approximately 5-8% on each transaction.

While 5%-8% doesn’t sound like much, avoiding these transactions saved me between $15,000 and $24,000 in the last ten years ($300,000 times 6 or 7%),

My cost savings are equivalent to what I spent ($18,000) for

  • Round Trip airfare from Los Angeles to Sydney,
  • A 28-day Holland America cruise to the South Pacific and New Zealand (including tours and other additional charges)
  • All expenses for a whole month traveling around Australia (with 3-star meals and accommodations)!

Setting up my life to avoid foreign exchange ripoffs didn’t take any special effort. All I had to do was sign up for ATM cards and credit cards without foreign exchange fees and avoid any foreign exchange transactions that use the dynamic conversion rate,

Fifty Plus Nomad offers personalized workshops and courses in Spanish, English, Living and Traveling in Mexico, and Long-Term Travel Book a Two-hour Free Sample Introductory Session

Some Additional Long-Term Travel Posts from Fifty Plus Nomad

Paul Heller has been a lifelong avid traveler and language learner and teacher, Even as a child, he told Santa Claus that he wanted to visit all the children worldwide. At seven years old, Paul wanted to retire to Mexico. At eight, he memorized the name, capital, location, and some facts about every country worldwide. At twelve, he found a book "Lonely Planet: Southeast Asia on a Shoestring" and started developing his own itinerary for a future round-the-world trip. He remained obsessed with travel; after getting a Master’s Degree in Public Administration from the University of Southern California and working as an administrator, He spent his vacations going to different countries around the globe studying language, touring, and volunteering. In 1994, he quit his job and lived in Russia as a volunteer English instructor. He discovered that he loved teaching languages. In 2004, he decided to make a living out of his travels and founded a community of people who love to travel just like him. He developed 5 three-hour classes about living and traveling long-term worldwide which he taught in over 50 adult education programs throughout the US. After his parents passed, he realized his dream of traveling around the world; cruising and touring some of the most remote places like the North Atlantic, Patagonia, and Oceania; and learning new languages (he knows Spanish, Italian, French, and Russian). Paul encourages everyone to learn foreign languages. He knows that it can be frustrating and slow but that anyone can learn a language if they put in the work and, most importantly, learning a language is well worth the time and effort because it opens up a whole new set of people, ideas, and cultures. He is currently spending the next chapter of his life in Mérida, México. He is excited about using this blog and his classes and workshops to inspire and equip fellow Fifty Plus Nomads with the language, cultural, and psychological skills necessary to be successful and happy long-term travelers and expats over 50.

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