Have you ever been at a shop abroad, about to pay, and the card machine asks: “Pay in SAR or USD?” You might think: “Let me go with SAR, I’ll understand the amount better.”
Big mistake.
That friendly option is costing you money every single time.
What seems like a helpful offer is actually costing you money. We tend to know (at least it's a thing I've somehow come to know for a while) to always pay in the local (foreign) currency, but I never really understood why until I went deep into fintech with SiFi.
Let me explain why choosing foreign currency is almost always the better option, whether you're traveling abroad or just paying for your Netflix subscription.
How it works: The Dynamic Currency Conversion (DCC) Trap
What you’re seeing when offered to “pay in your home currency” is called Dynamic Currency Conversion. It sounds convenient. It definitely isn’t.
Here’s what actually happens:
- When you pay in SAR, the merchant or ATM sets the exchange rate, not your bank or card provider.
- This "convenience" typically comes with a hidden markup of 4-10% on top of your purchase.
- This markup comes in the form of two things:
- An actual “markup percentage” which is the fee percentage they explicitly show you (like the 4.00% in our example), but it's only part of the total cost
- An “inflated foreign exchange rate” which means they're using an exchange rate that's worse than the actual market rate, essentially charging you twice
- in some cases only one of these is applied, but in the vast majority of cases you get charged a markup fee + an inflated foreign exchange rate, which essentially means you get charged twice
Let’s go through a real-life example and break down the numbers.
This is an example of this payment option in Thailand when I was trying to pay with my UAE-denominated card (apologies for the loading screen, I snapped that image a few seconds too late but it still manages to highlight all of the important details)
I had the option of choosing between paying in local currency (THB 2,801.26) or paying in my card’s currency (AED 328.22). Let's keep this 328.22 figure in mind.
You can also see that the machine highlights a ‘markup’ of 4.00%. This is already higher than my UAE card’s foreign exchange rate at 3% (unfortunately this wasn’t a business trip and I couldn’t use my SiFi card which has the best foreign exchange rates in the market at 2.5%🙂).
We’ll also come back to this 4.00% shortly.
Naturally, I ended up paying in the local currency, charged exactly THB 2,801.26
Now, let’s check my card statement which I received a few weeks later.
I ended up being charged AED 310.61. That’s an AED 17.61 difference, or ~$5 difference on one singular transaction. That’s 5.8% extra in markup that I fortunately avoided
Now let's take the 310.61 figure (which keep in mind already includes my bank's 3% markup), remove the 3% to get to the real exchange rate I was charged without any markups.
I used our good friend ChatGPT to quickly calculate the ‘original exchange rate’
Now let’s continue with ChatGPT to understand what the real markup is in that case
Remember that 4.00% markup? Well, the real markup that this machine was going to charge me with is actually more than double that amount at ~8.8%
With business spend, the amount of money left on the table can quickly run into tens of thousands of riyals annually
The Bottom Line
What's advertised as a 4% markup (when it's disclosed at all - many merchants don't even show this percentage) actually cost nearly 9% in real terms. This hidden markup happens millions of times daily across all international transactions - and most people never notice.
The same trap at ATMs
This applies to ATMs too. I recently experienced this firsthand as well when I tried to withdraw €160 from an ATM in France. The machine kindly offered to convert the amount and charge me AED 675.16. Note that the margin is mentioned here as 4.25%
I chose to skip the conversion and let my bank handle it. The actual amount I was charged? AED 664.80.
That’s a 10.36 AED difference (or an extra 1.7% margin) just for clicking the right button. Not life-changing, and not as massive as our Thai friends, but again, it compounds, especially in business spend where these decisions happen at scale.
It’s not just payment machines; online merchants are in on it too!
Think you’re safe because you're paying for Snap Ads or a SaaS tool? Think again.
Some international merchants (like Meta, TikTok, Microsoft and many others) detect your location or card currency and default to charging you in SAR. You might not even get a visible option to switch. Why? You’ve guessed it! Because they earn more when they set the rate.
Unlike physical POS machines where the choice is obvious, many online merchants make switching currencies deliberately difficult.
Changing to USD billing for example might mean tweaking settings, switching your account region, or even contacting support, but doing that legwork is worth it.
At SiFi, our customers are leaving money on the table in more than 45% of foreign transactions, or in other words nearly half of all business transactions are unnecessarily incurring higher fees due to poor currency selection
So what should you do?
The Golden Rule: Always choose foreign currency
Whenever you see this screen, whether on a POS machine or an online service, always pick the local (foreign) currency where you’re paying.
Let your card do the conversion - it's almost always cheaper and more transparent.
If you’re using a corporate card, look for ones that:
- Show you the real FX rate upfront
- Have no hidden margins or surprises
- Charge a flat, predictable fee on foreign transactions
This is why transparency matters. At SiFi, we charge a flat 2.5% FX fee - no hidden DCC markups, no inflated exchange rates, and no surprise math.
TL;DR:
| Scenario | Don’t do this | Do this instead |
|---|---|---|
| At a store abroad | Pay in SAR | Pay in the local currency |
| Withdrawing from an ATM abroad | Accept the ATM’s conversion | Let your bank do it |
| Paying Online marketing / SaaS tools | Get billed in SAR | Switch to USD or original currency |
Next time you see that “friendly” conversion screen — pause, switch to the foreign currency, and save yourself the margin. It’s a small habit with a big cumulative payoff.
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