What You Don’t Know About DCC Could Cost You Hundreds of Dollars in Credit Card Fees

If you have ever shopped overseas with your credit card at all, there’s a good chance that you have encountered dynamic currency conversion (DCC). But you may never have heard about it at all, even as it slowly burns a hole in your pocket.

What is DCC?

DCC is a service created to make it easier for you to use your credit card when you’re abroad.

Specifically, it gives you the option to charge a purchase in your home currency instead of the local currency where you’re shopping. For example, if you’re in the UK and paying with an American credit card, you can choose to pay for the transaction in US dollars instead of in pounds.

This sounds like a good thing. What’s the problem?

The problem is that merchants don’t do this out of the goodness of their hearts.

When you allow a retailer to charge your purchase in your home currency through the DCC service, he can convert the local price to your home currency using any rate he wants. This is probably not the best exchange rate you can get, to say the least.

On top of this, you have to pay various extortionate fees. There’s the “convenience” fee that could amount to 3% to 7% of the transaction. And strangely, despite paying in your home currency, your bank might still charge you a foreign transaction fee, which usually hovers between 2% and 3%.

Check this out:

So I pay a little more for the convenience of using my home currency. I still don’t see why this is a big deal.

If you prefer to pay in your home currency, regardless of the cost, that’s your choice.

The thing is, some merchants resort to lies and deception to make you go the DCC way.

This ploy began in Ireland, but it has spread to other parts of the world, where you may face language barriers. Among other tricks, the merchant might pretend to not understand what you’re saying when you request to pay in the local currency.

So what am I supposed to do with the DCC fee?

It depends.

If you prefer to pay in your home currency…

…please change your mind. You will not like the DCC fees and bad exchange rates. The cost of using the DCC service is so high that some people call it a scam.

In fact, the only advantage of using DCC is you would know exactly how much your transaction costs in your home currency — something a simple calculator can tell you. If that still seems like too much trouble, there’s an app for this. It’s called Trail Wallet and it will also help you keep track of your travel budget.

If you prefer to pay in the local currency…

Both Visa and MasterCard actually require that merchants get for your permission before charging any transaction in your home currency. (American Express does not allow its merchants to do DCC transactions.)

But some merchants do it without asking, so insist on it before you hand over your credit card and make sure the merchant understands you.

Remember that you still might have to pay a currency conversion fee to your credit card provider.

If the transaction goes ahead in your home currency before you have a chance to protest…

Stay calm and firmly ask them to void the transaction and charge your card again in the local currency. Ask to see the manager and, if necessary, tell them that you will dispute the charge with your bank. In many cases, they’d let you have your way to avoid getting into trouble with Visa or MasterCard.

If they insist that they can’t allow payment in your home currency…

Pay in cash if you can.

If you don’t have cash…

Take a closer look at the bill: it shows the transaction amount in both currencies and a statement that you have been offered to pay in the local currency.

Draw a circle around the local currency amount and cross out your home currency amount. On the bill, write: “local currency not offered” and sign it.

When you get your credit card statement, dispute the charge with your bank.

This method takes some time and effort on your part, but your credit card provider might impose a fine on the merchant, and revenge is sweet.

In any case, keep your receipt.

The merchant could say that they’d charge you in the local currency, then go ahead with a DCC anyway. If this happens to you, your credit card statement will come as a shock. But if you keep the receipt (or a photo of it), you can dispute the charge and recoup your losses.

This is a really easy trick to save on credit card fees when you travel, so don’t forget it! Pin this for your next trip:

There are other ways you could be losing money to various fees!

Check out these posts to drive your expenses down:

• Pay $0 in Credit Card Fees When You Travel Abroad
• 5 Essential Things to Do Before Traveling With a Credit Card
• Paying for Things While Traveling: Credit, Debit, Cash or…?

Images:  1&4. LotusHead (CC BY-SA 3.0 License); 2. J9s (CC BY-SA 3.0 License); 3. Quinn Dombrowski (CC BY-SA 2.0 License).