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I’ve heard the following rule of thumb:
Your bank has an existing customer relationship with you, so they have more of an incentive to make you a good deal on currency conversion, lest you pack up and leave.
The ATM operator’s relationship with you is literally transactional. They don’t give a crap who you are and even less of a crap once the ATM dispenses the money.
Thus, your bank is less likely to fleece you than the ATM operator, so you’re better off leaving the conversion to your bank.
Banks will still fleece you on the exchange rate. Ideally you would have a multi currency card so you decide which exchange rate to use and have the cash in the account in the local money.
It’s not hard to find a bank that only charges a 1% fee on the spot exchange rate. You shouldn’t be using a debit card (“cash in the account”) almost anywhere. Credit is so much better.
But the exchange rate is where they fleece you not the card usage fee.
Maybe if you have a bad bank, I’ve checked mine and it’s competitive. April 17 I did a Bandcamp transaction in GBP, charged my Chase card and got <1% difference in USD compared to the mid-market exchange rate on that date. It’s $90.21 on my statement, $89.92 when I calculate it, so +0.3% off the mid-market rate.
If you’re getting anything worse than this, you’ve got a shady bank, and there’s no lack of competition.
Don’t use a bank that charges $5 for currency conversion. If it’s anything more than an additional 1% it’s a shit bank. Always charge things in the local currency and let your bank do the conversion for +1%. Need cash? Hit a real bank ATM (not a shady kiosk one) with a debit card that refunds ATM fees and withdraw local currency for +1%. Currency conversion any other way is a complete ripoff, aside from ordering money from the bank before you leave.
But wait is that a flat $5 fee for any amount? That can quickly outcompete 1%…
How often are you spending >$500 vs <$500 on a single transaction in a foreign currency?
The advice I usually hear is to always pay in the local currency, using a card that covers the transaction fee.
I use my credit card which does the conversion for $0/0%
"$0" just means they don't charge a flat fee on top. You'd have to check the conversion rate they give you compared to market rate to really know.
It can be the case, even likely, that your card's rate is better than local currency converters and atms targeting tourists, but point is they're still not doing for free.
I'm almost 100 percent sure it's "free", and I think it's because they use themselves to advertise in their app and advertise their subscription, charge vendors fees, etc.