Bad Deal: Visa & Mastercard International Dynamic Currency Conversion

One of the negative trends that we have been seeing a lot of in the last few years with our international travels are credit card charges that are automatically converted to US Dollars. This process is called Dynamic Currency Conversion (DCC) and is available only for Visa and Mastercard users and is generally bad for consumers.

With DCC, merchants are permitted to give foreign customers a choice of transaction currencies, typically: 1) local currency; and 2) home country currency. However, rarely are customers offered the choice to select an option.

Most credit cards already charge a 2 – 3% foreign exchange fee for handling international transactions that are tied to published foreign exchange rates. However, every time we calculate the exchange rate of a DCC transaction, the DCC rate is an extra 3-7% on top of foreign exchange fee. So called “no foreign exchange fee” credit cards from Capital One, Schwab and premium Chase Visa/Mastercards DO NOT avoid DCC fees. DCC is especially egregious in Asia — specifically South Korea, China and Vietnam. So for a $1,000 transaction, you would pay $20 – $30 for the foreign exchange fee plus another $30 – $70 DCC hidden fee. That is not consumer friendly.

How do you avoid being hit with DCC?

  • If the merchant charges you in your home currency (e.g., US Dollars):
    • Refuse to sign the receipt
    • Have the merchant cancel the transaction
    • Have the merchant re-do the transaction in the local currency. You will run into merchants who pretends to not understand the issue, if that’s the case read below. Keep in mind, a percentage of the 3-7% DCC fee goes to the merchant, so they are incentivized to continue this discriminatory pricing practice for tourists who are least likely to complain.
  • Pay with cash
  • Pay with American Express. While paying with most American Express cards will result in a 2.7% foreign exchange fee (except for American Express Platinum Charge Card and Centurion Cardholders), you will come ahead if the merchant insist that DCC is the only option. American Express does not charge DCC fees or have it as an option.

Visa and Mastercard might call this a convenience for consumers because consumers can see all their charges immediately in their home currency and thus easier to see what goods and services cost, however, we here at The Flight Deal call it a scam and a bad deal!


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