Tweet
Any time a foreign merchant tries to charge you in dollars on a card transaction, or offers to do so as a ''convenience'', alarm bells should go off. You are about to be ripped off. This can happen online as well as when actually travelling abroad. It is happening everywhere, from western Europe to China to Australia.
This is being referred to as ''Dynamic Currency Conversion'' or DCC and it invariably gives you a horrible rate of exchange. And the worst thing is that it is absolutely useless to you. If your credit card is issued by the majority of card issuers which charge a ''foreign origin surcharge'' for the last few years this has been imposed regardless of the currency used, so a merchant converting it to dollars does NOT avoid your bank tacking on its own 3% (the usual). Of course, if you have one of the handful of cards like CapOne that does not impose this fee, you would not even have paid the 3% anyway.
Credit and debit cards generally convert currency at the Mid-Market Interbank Rate, the best possible rate for customers. DCC usually starts with an exchange rate that is worse for you than the MMIR and then adds another 2-3% service fee, meaning you are really paying 5-7% more in exchange fee than the rate applied by your card. If you are using a card that charges its own fee on top of that (most of them), then your real cost of exchange will be 8-10%. Using a card like CapOne and avoiding DCC, your cost would be 0%
Who is imposing DCC these days? It runs the gamut - airlines, restaurants, hotels, rental car companies, and shops all have some of their number doing it. It is important to carefully look at the documents in your tranaction to see that it is in local currency and not converted to your home currency. If you are paying by credit card, it helps to tell them before the card is run that you will be paying in local currency. Refuse to sign if you are presented a charge slip in your own currency.
According to the rules of the card issuers, DCC is valid only if it is your informed choice. It can be challenged if it is not. Many of those using it insert language that you have been offered a choice of currency and have chosen to make the exchange at their rate, but do not point this out. It is up to you to find it and object. Too often, the merchant claims they are unable to change it in their system, but if you demand to speak to a manager and threaten to complain to the Visa or Mastercard head office about the violation of their rules, often someone will appear who can change it. One Flyertalker confronted with a hotel which adamantly refused to change it, simply wrote ''exchange rate refused'' on the signature line instead of a signature and then succesfully challenged it with his card issuer. I recently had a situation with a rental car company (Goldcar Rentals in Spain) which claimed the conversion was done automatically by their computer and they had no means to change it and my only option if I did not agree was to cancel the rental, pay walkup rates somewhere else, and lose the deposit I had previously paid on the rental. I am first working through the consolidator (Economy Car Rentals) before doing the credit card challenge.
Online purchase of airline tickets can also get you zapped with DCC. Most do this by offering a box asking what currency you prefer to use, not telling you that using anything but the local currency will get you an awful exchange rate. Many are duped into just checking their own currency because that is the one they are most familar with. If offered a choice of currency, ALWAYS keep it in the local currency. A more deceptive method is used by RyanAir (surprise! suprise! surprise!), where the final payment page shows the amount in large numbers at the bottom right in local currency. What they hope you do not see before clicking to buy is a box with much smaller print at the lower left that says you want to convert the currency, and it is pre-checked. To avoid DCC on RyanAir you have to find and uncheck this box. Otherwise when your receipt comes on on the next page, it will be converted to dollars at a very bad rate. There have been reports on FlyerTalk of succesful challenges of this RyanAir tactic through card companies, so it is probably worth challenging. They probably figure that most will either let it go or not even catch it.
This is being referred to as ''Dynamic Currency Conversion'' or DCC and it invariably gives you a horrible rate of exchange. And the worst thing is that it is absolutely useless to you. If your credit card is issued by the majority of card issuers which charge a ''foreign origin surcharge'' for the last few years this has been imposed regardless of the currency used, so a merchant converting it to dollars does NOT avoid your bank tacking on its own 3% (the usual). Of course, if you have one of the handful of cards like CapOne that does not impose this fee, you would not even have paid the 3% anyway.
Credit and debit cards generally convert currency at the Mid-Market Interbank Rate, the best possible rate for customers. DCC usually starts with an exchange rate that is worse for you than the MMIR and then adds another 2-3% service fee, meaning you are really paying 5-7% more in exchange fee than the rate applied by your card. If you are using a card that charges its own fee on top of that (most of them), then your real cost of exchange will be 8-10%. Using a card like CapOne and avoiding DCC, your cost would be 0%
Who is imposing DCC these days? It runs the gamut - airlines, restaurants, hotels, rental car companies, and shops all have some of their number doing it. It is important to carefully look at the documents in your tranaction to see that it is in local currency and not converted to your home currency. If you are paying by credit card, it helps to tell them before the card is run that you will be paying in local currency. Refuse to sign if you are presented a charge slip in your own currency.
According to the rules of the card issuers, DCC is valid only if it is your informed choice. It can be challenged if it is not. Many of those using it insert language that you have been offered a choice of currency and have chosen to make the exchange at their rate, but do not point this out. It is up to you to find it and object. Too often, the merchant claims they are unable to change it in their system, but if you demand to speak to a manager and threaten to complain to the Visa or Mastercard head office about the violation of their rules, often someone will appear who can change it. One Flyertalker confronted with a hotel which adamantly refused to change it, simply wrote ''exchange rate refused'' on the signature line instead of a signature and then succesfully challenged it with his card issuer. I recently had a situation with a rental car company (Goldcar Rentals in Spain) which claimed the conversion was done automatically by their computer and they had no means to change it and my only option if I did not agree was to cancel the rental, pay walkup rates somewhere else, and lose the deposit I had previously paid on the rental. I am first working through the consolidator (Economy Car Rentals) before doing the credit card challenge.
Online purchase of airline tickets can also get you zapped with DCC. Most do this by offering a box asking what currency you prefer to use, not telling you that using anything but the local currency will get you an awful exchange rate. Many are duped into just checking their own currency because that is the one they are most familar with. If offered a choice of currency, ALWAYS keep it in the local currency. A more deceptive method is used by RyanAir (surprise! suprise! surprise!), where the final payment page shows the amount in large numbers at the bottom right in local currency. What they hope you do not see before clicking to buy is a box with much smaller print at the lower left that says you want to convert the currency, and it is pre-checked. To avoid DCC on RyanAir you have to find and uncheck this box. Otherwise when your receipt comes on on the next page, it will be converted to dollars at a very bad rate. There have been reports on FlyerTalk of succesful challenges of this RyanAir tactic through card companies, so it is probably worth challenging. They probably figure that most will either let it go or not even catch it.
Comment