Can I Buy Currency With a Credit Card?

Buying foreign currency with a credit card is a common consideration for travelers and individuals needing international funds. This method is generally possible, but it comes with specific costs and operational nuances that differ significantly from typical credit card purchases.

Understanding Credit Card Currency Transactions

Purchasing foreign currency with a credit card is almost universally categorized as a “cash advance” by credit card issuers. A cash advance is essentially a short-term loan against your credit line, allowing you to borrow money directly from your credit card account rather than making a purchase for goods or services. Unlike regular purchases, which often come with a grace period, interest on a cash advance starts accumulating immediately from the transaction date. Credit card companies categorize currency purchases this way due to the higher risk associated with providing cash directly, as well as regulatory differences between cash transactions and retail purchases. Cash advances typically have higher Annual Percentage Rates (APRs) than the rates applied to everyday credit card spending.

Costs and Fees for Currency Purchases

When using a credit card to obtain foreign currency, several costs and fees can apply. A cash advance fee is an upfront charge, commonly a percentage of the transaction amount (e.g., 3% to 5%) or a flat minimum (e.g., $10), whichever is greater. This fee is applied as soon as the cash advance is taken, regardless of how quickly the balance is repaid.

Interest accrues immediately on cash advances, at a higher APR than for purchases, often ranging from 24.99% to 29.99% or even higher. This means the total cost grows daily until the balance is paid in full. Foreign transaction fees, separate from cash advance fees, are typically charged on transactions processed in a foreign currency, whether made abroad or domestically with an international merchant. These fees usually range from 1% to 3% of the transaction amount and can be a combination of a network fee (e.g., 1% by Visa or Mastercard) and an issuer fee (e.g., 1% to 2% by the card-issuing bank).

Additionally, the exchange rate provided by the credit card network or currency exchange service may include a markup. This markup is a percentage added to the interbank exchange rate, which is the rate banks use for large currency trades, and it contributes to the provider’s revenue. If currency is obtained from an ATM, additional fees may be imposed by both the credit card issuer and the ATM operator.

Methods for Obtaining Foreign Currency with a Credit Card

There are several practical ways to obtain foreign currency using a credit card, primarily through cash advance mechanisms. One common method involves visiting a bank branch or a dedicated currency exchange kiosk. At these locations, you typically present your credit card and a valid form of identification to a teller, who will process the cash advance and provide the requested foreign currency.

Another widely used method is performing a cash advance at an automated teller machine (ATM). This requires inserting your credit card into the ATM, entering your Personal Identification Number (PIN), and selecting the “cash advance” or “cash withdrawal” option. You will then specify the desired amount and acknowledge any associated fees before the currency is dispensed.

Some online services also facilitate currency purchases with a credit card, though these often involve delivery of the currency to a physical address or require pickup at a designated location. These platforms streamline the ordering process, but the underlying transaction will still be treated as a cash advance.

Practical Considerations for Currency Exchange

Using a credit card for currency exchange can affect your financial standing beyond the immediate costs. A cash advance increases your outstanding balance, which in turn raises your credit utilization ratio—the amount of revolving credit you are using compared to your total available credit. High utilization, typically above 30%, can negatively impact your credit score.

Credit card issuers and ATM operators often impose daily or per-transaction limits on cash advances. These limits can vary, with ATM daily withdrawal limits commonly ranging from $300 to $1,000, regardless of your overall cash advance limit. While credit card cash advances are an option, other methods for obtaining foreign currency, such as using a debit card at an ATM or carrying local currency, may offer more cost-effective solutions due to lower fees and interest charges.

Before traveling, it is generally advisable to notify your credit card issuer of your plans, although many issuers now have advanced fraud detection systems that make this less of a strict requirement than in the past. Nevertheless, ensuring your contact information is current allows your card issuer to reach you if they detect unusual activity, helping to prevent your card from being flagged for fraud and potentially declined.