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One of the negative trends we’ve seen in the last few years when traveling internationally are merchants that give you the option to be charged in US Dollars for credit card transactions overseas. This process is called Dynamic Currency Conversion (DCC). It’s available for Visa and Mastercard and it’s generally bad for consumers

With DCC, merchants are permitted to give foreign customers a choice of transaction currencies – local currency or your home country currency. When presented with this always select the local currency. If you are in United Kingdom, select the pound; when you are in the Eurozone, select the Euro and so on.

Every time we calculate the exchange rate of a DCC transaction, the it is an extra 3-7% compared the exchange rate as shown on XE.COM at the moment.  DCC is especially egregious in Asia, specifically South Korea, China, and Vietnam.  DCC fees are charged even with no foreign transaction fee cards. For a $1,000 transaction, you would see a $30 – $70 DCC hidden fee. And if you don’t use a no-foreign transaction fee card, that’s an additional 2-3%.  That is NOT consumer friendly.

DCC is like burning money – Photo: TaxRebate.org.uk via Flickr, used under Creative Commons License (By 2.0)

How do you avoid Dynamic Currency Conversion?

• 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.
    • We ran into an issue in Madrid last year that the transaction would only go through if we were charge in our home currency. We paid since it was the only shop with the item. When we returned to the United States and then disputed the transaction.
      • For Visa Cards – the dispute code is “Reason Code 76: Incorrect Currency or Transaction Code.”  Reason Code 76 is used when the transaction was processed with an incorrect transaction code, or an incorrect currency code, or one of the following:
        • Cardholder was not advised that Dynamic Currency Conversion (DCC) would occur
        • Cardholder was refused the choice of paying in the merchant’s local currency [“Language issues” and “incompetent staff” falls under this “refusal”.]
      • For Mastercard – File a dispute with Reason Code 4846 which covers currency conversion disputes in the following circumstances:
        • The cardholder states that he or she was not given the opportunity to choose the desired currency in which the transactions was completed or did not agree to the currency of the transaction,[“Language issues” and “incompetent staff” falls under this “lack of opportunity to refuse”.]
• Pay with cash
• Pay with American Express.  American Express cards do not charge DCC fees or have it as an option, but international coverage is mixed. The following cards do not have foreign transaction fees and would be optimal for charges:
  • The Platinum Card
  • Premier Rewards Gold Card
  • Gold Delta SkyMiles Credit Card
  • Platinum Delta SkyMiles Credit Card
  • Delta Reserve Credit Card
  • Starwood Preferred Guest Credit Card

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, paying extra for this type of convenience isn’t worth it.

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