Dynamic Currency Conversion and Why It Sucks

What is DCC?

Dynamic Currency Conversion is a fancy term for a ridiculously high in-machine conversion rate charged by the merchant’s credit card terminal. This is most common in those little, handheld credit card machines that have made paying with plastic so easy around the world.

A Complex Process

When you swipe your credit card, your payment travels through a complicated web of payment gates, credit card companies, and banks. Every time that transaction touches something, it wants to get paid, like a gauntlet of greedy hands tacking on percentage points.

A Foreign Complication

When you swipe your credit card in another country, a currency conversion gets added to that process, and of course makes it just a little bit more expensive.

Without DCC, the conversion rate is set by the credit card company (Visa, Mastercard, Amex) fairly close to the actual market rate. Depending on what kind of credit card you have this conversion is not a big deal. And if you happen to be paying foreign transaction fees you should just stop reading now. You’re a lost cause.

But then banks got greedy.

Not satisfied by their piece of the pie, the banks thought up a way to get in on the currency conversion action. Enter DCC. Advertised as a convenience, this service offers to convert the currency into your home currency at the terminal instead of letting your credit card handle it later. This comes with a terrible conversion rate that can be as high as 18 f***ing percent. It’s being marketed as a benefit and some companies even go as far as to say that using DCC makes it easy to see charges instantly in your home currency instead of the normal day or two for processing. Who the hell is checking their statements so continuously that this would be necessary?

Just say no

So what is a humble traveler to do in order to avoid crazy fees? Always ask to be charged in the local currency and let your credit card issuer convert it later. Never accept a charge that is converted at the terminal.

Some greedy merchants won’t tell you there’s the option and automatically select DCC for you. We got hit with this a few times by not paying attention. Make sure that the receipt you’re signing is charged in the foreign currency. If you are charged in your home currency, politely ask for the transaction to be canceled and re-done in the local currency without dynamic currency conversion.

Good luck out there!