What a purchase abroad really costs
Your data
Paying by credit card
Buying cash beforehand
A prepaid card loaded in advance
The tax rates are yours to type because they are law, and law changes. A number frozen into this page would eventually be wrong about somebody's money, so the page asks instead of guessing.
Results
The cheapest way to pay, all in
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| Way of paying | What you end up paying | Per unit of foreign currency | More than the cheapest |
|---|
What the markup and the tax add up to on the cheapest option
| Adding the two percentages, the way it is usually done | — |
| What they actually come to together | — |
The two do not add, they multiply: the tax is charged on an amount that already carries the markup, so it is charged on the markup as well. Four percent and three and a half percent come to seven point six four, not seven and a half, and the gap widens as the numbers grow: twenty and ten come to thirty two rather than thirty.
Quoting a tourist rate against a plain one compares two different things, because the tourist rate already has a markup inside it while the plain one does not. The only fair comparison is the one in this table: how much of your own money leaves your hands for each unit of the foreign currency, with everything counted.
Why do I have to type the tax rate myself?
Because it is law, and law changes. A rate frozen into this page would go on looking authoritative long after it stopped being true, and it would be wrong about somebody's money rather than about a trivia question.
Typing it also lets the page work for any country and any kind of payment, since the same arithmetic applies wherever the rate comes from.
Do the markup and the tax simply add up?
No, they multiply. The tax is charged on an amount that already includes the markup, so it is charged on the markup too. A markup of four percent with a tax of three and a half comes to seven point six four percent, not seven and a half.
The gap is the two percentages multiplied together, so it grows as they do. Twenty percent and ten percent come to thirty two, not thirty, and at that size the difference is worth real money.
Does the cheapest option depend on how much I am spending?
Only if one of the options charges a flat fee. Without one, every cost is a straight percentage, so the ranking is the same whether you are spending a little or a lot. Checking the amount tells you nothing.
A flat fee changes that, because it weighs heavily on a small purchase and barely registers on a large one. In the example this page opens with, a flat fee of fifteen makes the prepaid card lose below about two hundred units and win above it.
Why not just compare the tourist rate with the plain rate?
Because they are not the same kind of number. A tourist rate already has a markup built into it, while a plain rate does not, so putting them side by side compares a price with a cost.
The comparison that means something is the one in the table: how much of your own money leaves your hands for each unit of the foreign currency, with the markup, the tax and any fee all counted in.
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