Overseas travellers and online customers are likely to end up paying more for their purchases if they opt to pay in New Zealand dollars when they use their credit cards, the Banking Ombudsman says.
Ombudsman Deborah Battell said her office had received complaints indicating that paying in kiwi dollars when using credit cards may actually cost travellers or online purchasers more.
"Our enquiries have revealed that complainants were likely to be right about purchases costing more," she said in a statement.
Battell said it was becoming increasingly popular for merchants overseas, such as retailers, accommodation providers and restaurants, to offer travellers the option of paying for purchases in the currency of their credit cards.
"So, if you hold a New Zealand credit card, you can elect to be charged in New Zealand dollars rather than the currency of the country in which you are travelling," she said.
This also applies to online purchases.
The office had also received complaints that some overseas merchants were not offering travellers a choice and simply processing the transaction in New Zealand dollars.
"Presumably this is because they can make an additional margin on the sale," she said.
Exchange rates are set by the relevant credit card company, but currency conversion fees, which are additional fees charged for converting foreign currency into other currencies, are set by merchants, including banks.
Banks in New Zealand typically charge between two and three per cent of the New Zealand dollar amount.
"The main advantage of paying in your home currency is that you know what you will actually pay at the time you make the purchase. However, from our experience you are likely to pay more for the privilege as currency conversion fees are typically higher."
The Banking Ombudsman's advice is:
* Find out what currency conversion fee your bank charges before you go away.
* Ask the overseas merchant what their conversion fee is before the transaction is processed.
* If the overseas merchant's conversion fee is higher, or they won't tell you, ask to have your credit card charged in the country's currency rather than NZD.
* If the merchant insists on charging in NZD, then you have the right to decide whether you want to proceed with the purchase or shop around for a better deal.