Hey everyone, welcome back to My Weird Prompts. I am Corn, and I am sitting here in our living room in Jerusalem with my brother, the one and only Herman Poppleberry.
Herman Poppleberry, present and accounted for. It is good to be here, Corn. We have got a really practical, almost painfully relatable topic today. Our housemate Daniel sent us a voice note about something that I think every digital entrepreneur or freelancer outside the United States feels in their soul every single month when the credit card statement arrives.
Yeah, the dreaded currency conversion tax. Daniel runs a digital consultancy, and like so many of us, his entire toolkit is American. We are talking OpenAI, Anthropic, Google Cloud, and a dozen other software-as-a-service subscriptions. These are all priced in U-S dollars. But because we are here in Israel, his business card is in shekels. And the banks... well, they do not make it easy, do they?
They certainly do not. It is what I like to call the double friction of the digital nomad. You have the actual exchange rate spread, which is the difference between the mid-market rate and the rate the bank gives you, and then you have the foreign transaction fees. It is like being nibbled to death by ducks, one three percent fee at a time.
And Daniel specifically mentioned the lack of benefits on local cards compared to the legendary American ones. You see people on the internet talking about flying first class on points from their business spend, and then you look at your local bank card and you might get a free coffee once a month if you spend ten thousand shekels. It feels like we are playing a different game.
We are playing a different game, Corn. The American credit card market is uniquely competitive because of the interchange fees that merchants pay, which can be as high as two or three percent. That allows U-S banks to offer those massive rewards. In Israel and Europe, those fees are capped much lower, so the rewards pool just is not there. But today, I really want to dive into the mechanics of why this is such a headache and what the actual alternatives are. Because there are better ways than just letting your local bank take a huge cut of every A-P-I call you make to Claude or G-P-T four.
Let us start with the basics then. When Daniel uses his Israeli business card to pay for a hundred dollars worth of OpenAI credits, what is actually happening behind the scenes that makes it so expensive? Most people just see the final charge in shekels and shrug, but the math is pretty brutal.
It really is. You have two main players here. You have the card network, like Visa or Mastercard, and then you have your issuing bank. Visa and Mastercard actually have pretty fair exchange rates, usually very close to the mid-market rate. But then your local bank adds their own layer. In Israel, it is common to see a foreign currency transaction fee of anywhere from one point five percent to nearly four percent.
Four percent! That is a massive margin for what is essentially an automated digital process.
It is pure profit for the bank. And remember, that is on top of the spread. If the interbank rate for the dollar is three point seven shekels, the bank might calculate your transaction at three point seventy-five. When you add that on top of a three percent commission, you are effectively paying a huge premium. If you are a consultancy spending, say, five thousand dollars a month on cloud hosting and A-P-I tokens, you could be flushing two hundred dollars a month down the toilet just for the privilege of paying your bills.
That is twenty-four hundred dollars a year. That is a vacation or a new high-end laptop. It is not just pocket change. And Daniel mentioned another layer of complexity, which is the residency and tax issue. A lot of people say, well, just get a U-S credit card. But if you are not a U-S resident, that is a mountain of paperwork. And if you are married to a U-S citizen, like Daniel mentioned, suddenly the I-R-S enters the chat.
Oh, the Internal Revenue Service. They have a very long reach. For those who do not know, the United States is one of the only countries that taxes based on citizenship, not just residency. If you are a U-S citizen, or even if you are just married to one and file jointly, you are considered a U-S person for tax purposes. This means you have to disclose foreign bank accounts under the Foreign Account Tax Compliance Act, or F-A-T-C-A, and the Report of Foreign Bank and Financial Accounts, known as the F-BAR.
So if Daniel opens a U-S-based business account to get a better credit card, he might be triggering a whole new set of reporting requirements that could cost more in accountant fees than he saves in exchange rates.
That is a classic trap. You solve a ten-dollar problem and create a thousand-dollar compliance headache. But here is the thing, Corn, the world of fintech has evolved. We are not stuck with just the big traditional banks anymore. There are bridge solutions now that sit right in the middle.
You are talking about things like Wise or Revolut? I know we have used Wise for some of our international stuff, but how does that work for a business based in Israel that needs to pay U-S dollar bills?
Wise is the gold standard here. For a business like Daniel’s, he can open a Wise Business account. It gives him local bank details in the U-S, the U-K, Europe, and several other places. So, he gets a U-S routing number and account number, just as if he had a bank in New York, even though his business is registered in Israel.
But how does he get the money in there? If he is earning shekels from local clients, he still has to move that money into the dollar account. Does that not just move the exchange fee to a different step in the process?
It does move it, but it shrinks it significantly. Traditional banks might hide a three or four percent cost in the spread and fees. Wise is transparent and usually charges around zero point five percent. So instead of losing four dollars on every hundred, he is losing fifty cents. And here is the kicker: once the money is in his Wise U-S-D account, he can use a Wise Business debit card to pay Anthropic and Google Cloud directly in dollars.
Ah, I see. So because the card is denominated in dollars and the balance is in dollars, there is zero transaction fee at the point of sale. He pays the conversion fee once when he moves his shekels into the dollar bucket, and then every single software subscription for the rest of the month is a clean, one-to-one dollar transaction.
Precisely. No more surprises on the monthly statement. No more guessing what the exchange rate was at midnight on a Tuesday when the Google Cloud bill hit. It is much more predictable. And for a consultancy, predictability is everything for cash flow.
That sounds like a win for the exchange rate side. But what about the benefits side? Daniel was lamenting the fact that Israeli cards do not give you those sweet travel points or cash back. Do these fintech cards offer anything like that?
That is the trade-off. Most of these multi-currency debit cards like Wise or Payoneer do not have a robust rewards program. They are built for efficiency, not for perks. If you want the perks, you usually have to go into the world of true U-S credit cards, which as we discussed, is a much higher hurdle. However, there are some newer players in the U-S that cater to the international startup crowd, like Mercury or Brex.
I have heard of Mercury. They are quite popular with tech startups. Can an Israeli business actually get an account there without a U-S entity?
It has become much harder recently. As of twenty-twenty-four and twenty-twenty-five, Mercury and Brex have significantly tightened their requirements. They often require a U-S entity like a Delaware L-L-C and a physical U-S presence. For a solo consultant or a small shop, setting up a U-S company just to get a credit card is usually overkill. You have to file a U-S tax return for the L-L-C, deal with Form fifty-four seventy-two, and potentially face withholding taxes. It is a lot of weight to carry just for some airline miles.
So for Daniel, the Wise approach seems like the most balanced path. But let us talk about the I-R-S angle he mentioned. If he uses a service like Wise, does that trigger the same reporting nightmares as a traditional U-S bank account?
This is a common point of confusion. From the perspective of the I-R-S and the Treasury, a Wise account is still a foreign account if the entity owning it is foreign. If Daniel’s business is an Israeli business, the account is considered a foreign financial account. If he and his wife have more than ten thousand dollars in foreign accounts at any point during the year, they have to file that F-BAR form, which is FinCEN Form one hundred fourteen.
Ten thousand dollars is not a lot for a business. A few good months of revenue and you are over that threshold easily.
You are right. But here is the secret: the F-BAR is just a disclosure form. It does not mean you owe tax on that money to the U-S; it just means you have to tell them it exists. It is a hassle, but it is a manageable one. The real danger is not the reporting; it is the potential for double taxation if you do not set things up correctly. But simply using a multi-currency card to pay for A-P-I credits is unlikely to create a new tax liability. It is just an expense.
Okay, so let us look at the other side of the coin. Are there any local Israeli solutions that are better than the standard bank card? Maybe Daniel is overlooking something right here at home?
There are business-specific cards in Israel that are slightly better. For example, if he can get a card through a group like Hitechzone or a specific business association, the foreign currency fee might be dropped to one percent or even zero point eight percent. It is worth checking if he qualifies for a Max Business or a Cal Business card with a specific high-tech "track." But even then, you are still at the mercy of the bank's internal exchange rate. You are never going to get that clean one-to-one dollar experience you get with a U-S-D denominated balance.
It feels like the banking system is just fundamentally misaligned with how the internet works. The internet does not care about borders, but the banks are still guarding their little moats and charging us for the privilege of crossing them.
You hit the nail on the head. We are living in a world of global digital services, but our financial identities are still tied to our geography. It is a legacy system. Think about it: when Daniel buys A-P-I credits from Anthropic, that data is flowing through servers all over the world. There is no physical border being crossed. But the moment the payment happens, the legacy banking system kicks in with its eighteenth-century concepts of currency exchange.
It is funny you mention eighteenth-century concepts. It really does feel like that. So, if you were in Daniel’s shoes, running this consultancy, what would be your step-by-step strategy?
Alright, here is the Herman Poppleberry blueprint for digital expense management. Step one: stop using your local bank card for anything denominated in dollars. You are losing too much money. Step two: open a Wise Business account. It is relatively easy to set up for an Israeli business. You will need to provide your business registration documents and go through identity verification, but once it is done, you have that U-S-D bucket.
And then he just transfers a lump sum of shekels once a month?
That is the idea. Look at your average monthly spend on OpenAI, Google, and whatever else. Let us say it is two thousand dollars. At the start of the month, convert enough shekels to cover that. You pay the conversion fee once, at a much better rate than the bank. Step three: use the Wise virtual cards. This is a great feature for security. You can create a specific virtual card just for OpenAI and another one just for Google Cloud.
Oh, I like that. If one of those services gets breached or has a billing error, you can just kill that specific virtual card without affecting your whole business.
That is it. It is much more secure than having one physical card number floating around ten different American websites. Step four: and this is for the tax side, keep a clean folder of every invoice. Since you are paying from a foreign account, your local Israeli accountant will need to see the proof of the expense to deduct it from your Israeli taxes. Most accountants here are now very familiar with Wise, so it is a standard procedure.
What about the rewards, though? Is there any way to get some of that sweet cash back or those travel points while staying in this fintech ecosystem?
Honestly, for most small consultancies, the amount you save on exchange rates is going to be significantly higher than the value of any points you would earn on an Israeli card. If you save three percent on five thousand dollars, that is a hundred and fifty dollars in cash. To get a hundred and fifty dollars worth of value out of an Israeli credit card's rewards program, you would probably have to spend fifty thousand dollars. The math just does not favor the rewards.
That is a really good point. We often get blinded by the perks and forget to look at the raw cost of the transaction. It is like choosing a gas station because they give you a free air freshener, even though the gas costs twenty cents more per gallon.
Right! You are paying for that air freshener ten times over. Now, there is one more advanced strategy. Some people use their Wise account to fund a U-S-based platform like Payoneer which sometimes offers different card options, but Wise is generally the cleanest for a simple consultancy.
So the Wise route is the Goldilocks solution. Not too simple that you get ripped off by the local banks, and not too complex that you end up in a room with an I-R-S auditor.
That is the key thing. It is the pragmatic middle ground. And it solves the currency pair problem perfectly. You are managing the shekel-to-dollar pair at the point of your choosing, with a transparent rate, rather than letting the bank choose for you at the most expensive possible moment.
You know, it is interesting. We are talking about A-P-I credits for things like Claude and G-P-T four. These are the cutting edge of human technology. And yet, the bottleneck for a small business using them is this ancient friction of currency. It is like having a warp drive on your spaceship but having to pay a toll in gold coins every time you leave the atmosphere.
That is such a great analogy, Corn. We are building the future on top of a financial system that was built for a world of physical goods and slow-moving ships. But the fintech companies are slowly building the digital layer on top of that. That is why I get so excited about things like multi-currency accounts. They are the plumbing of the global digital economy.
Let us talk about the accidental American or the spouse issue again for a second. If Daniel’s wife is a U-S citizen, and they are filing jointly, does the Wise account actually make things easier or harder for their annual tax filing?
It adds one line to the F-BAR. That is it. You list the account, the maximum balance during the year, and the name of the institution. It is not a reason to avoid it. The mistake people make is thinking that hiding these accounts is better. It is not. Transparency is your friend with the U-S government. If you disclose it, they generally do not care, as long as it is a legitimate business expense. The headache only starts if you have huge amounts of unexplained income sitting in those accounts.
So Daniel should just embrace the paperwork. It is the cost of doing business globally.
Right. And honestly, if he is using an accountant who knows how to handle international clients, it is a very standard procedure. It should not take more than fifteen minutes of extra work once a year.
What about the future? Do you see this getting easier? We are in twenty-twenty-six now. We have seen the rise of stablecoins and decentralized finance. Could Daniel just pay Anthropic in U-S-D-C or some other digital dollar and bypass the banks entirely?
We are getting there, but we are not there yet for mainstream business services. Some smaller developers accept crypto, but the big giants like Google and Amazon still want their traditional fiat currency. However, the backend of services like Wise is increasingly using these technologies to move money faster and cheaper. So even if Daniel does not see the crypto part of it, he is benefiting from the modernization of the rails.
It is the fintech in the front, legacy in the back approach.
Precisely. It is a transition period. Maybe by twenty-thirty, the idea of a foreign currency transaction fee will seem as quaint as long-distance telephone charges. Remember when we used to pay by the minute to call someone in another country?
I do. It seems absurd now. You just open a video call and it is free. The cost of distance has dropped to zero for communication. We are just waiting for the cost of distance to drop to zero for value.
And until it does, you have to be smart. For Daniel, that means taking control of the conversion process. Do not be a passive victim of the bank's default settings. The default is designed to make the bank money. You have to opt out of that and choose a path that favors your business.
It is a good lesson for life in general, honestly. The default settings are rarely the optimal ones for the user. Whether it is your privacy settings on social media or your currency conversion at the bank.
That is true. And for a consultancy, those small optimizations compound. If Daniel saves two thousand dollars a year and reinvests that into better tools or more A-P-I credits, he is going to have a more competitive business. He can afford to be smarter.
I love that. Afford to be smarter. That should be the motto for this whole discussion. By being smarter about the boring stuff, like bank fees, you free up the resources to be smarter about the interesting stuff, like how to use Claude to solve complex problems for your clients.
That is the Poppleberry-approved plan. It is efficient, it is legal, and it puts those extra shekels back into his pocket instead of the bank's vault.
I think that is a great place to wrap this up. Daniel, thanks for the prompt. It is a question we have actually grappled with ourselves living here in Jerusalem, so it was good to finally dig into the mechanics of it.
Definitely. It is one of those invisible frictions of modern life that feels so much better once you smooth it out.
And to all our listeners, if you have found this useful, or if you have your own tricks for managing the currency tax in your country, we would love to hear from you. We are always curious to hear how people are hacking these legacy systems.
And hey, if you have been listening for a while and you are enjoying these deep dives, please do us a huge favor and leave a review on your podcast app or a rating on Spotify. It really does help the show reach more people who are trying to navigate these weird digital waters.
It really does. We appreciate every single one of you. This has been My Weird Prompts. I am Corn.
And I am Herman Poppleberry.
We will see you next time. Goodbye!
See ya!
