“Dynamic Currency Conversion” (DCC) is a sneaky way for merchants, and now banks as well, to make a little extra out of every transaction while you travel. It masquerades as a convenience for you “so you’ll know how much you spent in dollars” or as a way to avoidv foreign transaction fees.In reality, it isn’t either of those; it’s a way for you to be charged an unfavorable exchange rate.
When you pay for your 100€ dinner with your credit card, the restaurant’s bank asks your credit-card issuer for that amount. It pays, and then charges you in dollars, based on the low exchange rate that banks use among themselves. But if you let the restaurant charge you in dollars, the exchange rate is anything they want it to be.
The Euro usually goes for between $1.30 and $1.40. If your transaction happens when the rate is $1.35, your dinner will cost you $135. But if the restaurant uses a rate of $1.40 all the time, no matter what the bank rate is, you’ll pay $140. Add that up over a week or two of vacation, and it gets serious.
Until recently, it wasn’t all that common, but bad news never keeps to itself very long, and each year we’ve seen more of it. Last summer, we found that banks in Portugal (and we’ve heard elsewhere as well) are offering DCC when you use an ATM to withdraw funds from your account. Each time I compared the rate offered to the day’s bank rate, I found at least a 3% difference. This morning, in Seville, Spain, an ATM offered to charge me in dollars at the rate of $1.44 per Euro!
This winter, we found that most retail terminals, in stores, restaurants and elsewhere, asked us if we wanted to pay in dollars or Euros…and in one case the “helpful” clerk picked dollars so fast we didn’t even see it!
So, since it appears to be spreading, keep on the alert for DCC. Anytime you’re paying and you hear or see the word “dollars” say right away “Euros” or “baht” or whatever local currency you are dealing with…and check the slip before signing.
And…what about the supposed advantages of DCC? Well, if you want to check how much something costs in dollars, you can either print out a little chart (link below) or, on your smartphone browser, just type in the amounts and get an instant answer. Examples: “125 Euros in USD” or “250 USD in Great Britain pounds” etc. Most currencies can be represented by 3-letter codes such as USD, EUR, GBP, CAD, etc.
As for the other benefit, of avoiding a “foreign transaction fee” from your bank or card issuer: A far better way is to use a card that doesn’t charge those fees…and more and more of them are available. Capital One used to be the only one, but there are now many more. Chase’s United Plus Explorer and British Airways cards; several versions of the Citibank AAdvantage cards have eliminated the fee, and starting May 1st, all Delta-branded American Express cards will waive the fees.
For a regularly updated list of cards with no foreign transaction fee, check HERE. TravelGumbo recently featured a blog on some cards with high mileage bonuses. And for a Gumbo blog with general advice on Managing Your Money on the Road, click HERE. And here's the LINK for GoCurrency.com's neat page where you can print a credit-card sized conversion chart for almost any currency.
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