While traveling, I've had to take money out of ATMs several times. And often, I'm been asked if I want the money debited from my account in the local currency or in US dollars. And so I decided to do some math to see what the better choice was.

In Perth, I withdrew 120 AUD (Australian dollars). There was a 5 AUD transaction fee on top of this, so it ended up being 125 AUD.

The machine gave me the option of debiting my account 125 AUD or of debiting my account 84.49 USD. I chose to debit my account in AUD. I later checked my account statement to see what this was equal to in USD, and it ended up being 84.49 USD. So this ATM would have charged nothing extra to take the money out in USD.

Later, in Broome, I went to an ATM to withdraw 100 AUD. There was a 4.95 AUD transaction fee on top of this, so it ended up being 104.95 AUD.

The machine gave me the option of debiting my account 104.95 AUD or of debiting my account 78.73 USD. Again, I chose to debit my account in AUD. I later checked my account statement to see what this was equal to in USD, and it ended up being 71.99 USD.

This means that they would have charged me $6.74 extra to take the money out in US dollars! What a ripoff!

Later, I went to buy some groceries using my credit card. I was given the option of paying 14.68 AUD or 10.56 USD. I chose to pay in Australian dollars. Later I looked at my bill, and I saw that they had charged me 9.93 USD.

This means that they would have charged me an extra 63¢ to pay the bill in US dollars. It seems small, but if I were to pay for everything this way, the fees would add up quickly.

Sample Problems

1. Calculate the markup rate (to the nearest tenth of a percent) to use USD for the grocery purchase, where I would have been charged $10.56 but was actually charged $9.93.

2. Calculate the markup rate (to the nearest tenth of a percent) to use USD for the ATM withdrawal, where I would have been charged $78.73 but was actually charged $71.99.

3. If I had taken out the equivalent of 1,000 USD from this ATM, what would the fee have been to debit my account in USD?