How are currency conversion rates applied for purchases made abroad?
Short answer
For purchases made abroad, the card network (Visa or Mastercard) converts the foreign currency to USD using its daily exchange rate, typically based on the settlement date. A network assessment fee of about 1% may apply and issuers may add foreign transaction fees, bringing total costs to roughly 0–3.5% depending on the card.
How currency conversion works
When you swipe a card internationally, the conversion typically happens in stages:
1. Merchant captures the transaction in their local currency (EUR, GBP, etc.)
2. Card network converts the amount to USD using their daily exchange rate, which includes their own small markup that varies by currency pair
3. Transaction posts to your account in USD with all conversion fees included
The exchange rate applied is typically the rate in effect on the settlement date (1–3 business days after purchase), not the authorization date.
What affects your exchange rate
Several factors determine the final rate you receive:
- Currency pair: Major currencies (EUR, GBP, JPY) have tighter spreads than emerging market currencies
- Card network: Visa and Mastercard apply similar FX methodologies; a \~1% international assessment may apply
- Issuer markup: Depending on your card program, issuers may add 0–2.5%
- Transaction timing: Rates fluctuate throughout the day based on market conditions
Avoiding Dynamic Currency Conversion
When paying abroad, merchants may offer to charge you in USD instead of local currency. This is called Dynamic Currency Conversion (DCC).
Always decline this option. DCC applies exchange rates with 5–12% markups plus additional fees, which is significantly worse than standard card network rates.
Choose to pay in the local currency and let the card network handle the conversion at standard rates.
How it works on Ramp
Ramp follows standard Visa network conversion for international transactions:
- No foreign transaction fees: Ramp does not charge an additional issuer FX fee. Unlike many business credit cards that add a percentage, Ramp applies no extra markup for international purchases.
- Real-time visibility: International transactions appear in your Ramp dashboard once settled, showing both the original currency amount and the USD-converted amount.
- Automatic expense tracking: Ramp automatically captures merchant details, location, and converted amounts for seamless categorization.
- Flexible receipt management: Employees can upload receipts in any currency; Ramp stores both the original and converted amounts for accurate reconciliation.