Which currency should I use to pay for my flight ticket?

Question

I am buying flight tickets for a forthcoming trip. The website that I am booking through allows me to pay in many different currencies. I have one credit card each for payment in three different currencies. As you know, I would incur no currency exchange fee if I pay in the currency that a card uses. Based on the current foreign exchange rates, does it make sense to prefer paying in one currency over another? If yes, then how do I choose that currency?

For example, if the current rates suggest that USD is growing over EUR, does it make sense to pay in USD?

I know that practically the difference may not be much, but I would like to save whatever little I can.

Answer 1

Besides currency exchanges there are several other issues:

• Does a particular credit card give you better protections regarding cancellations
• Does a particular credit card give you airline miles or some other benefit (cash) that would make that a much better deal?
• Is there a currency that you are most likely to have the funds in when the payment is due?
• Are you approaching the credit limit for one of the cards?

Otherwise you are guessing how the rates will changes over the next several weeks or months.

Answer 2

Avoid conversions unless you can see their rates and you see the final amount charged. Otherwise you depend on hidden rates (which may be lower than the market ones) and on rate variations that occur if your foreign-currency transaction needs more than one day to be correctly accounted.

Answer 3

Actually, there is a way to check what the market thinks that the exchange rate will be in the future. There is a deep market for forwards which are contracts for the exchange of currencies on a particular future date. So, in a sense the currency forward rate is (with a small caveat or two) the expected rate of exchange on a future date... say the date you would pay each credit card.

For major currencies and reasonable time periods this is a tiny adjustment. For instance, on October 16, 2014 the spot rate for Euro/Dollar was 1.2809 and the forward rate one month later was 1.2811. A matter of a few cents at most on a plane ticket, but a big deal if you are say Nike making millions in Euro each month.

The real issue with trying this calculation is that this rate is very much an educated guess. Currency rates move around violently and mostly randomly and this randomness will swamp any time effect in the above paragraph. Honestly, your best bet for the tickets is just to compare the price of the ticket in EUR and the price in USD to the current exchange rate and, if you can, to make sure you pay off your credit card bill in full every month.