What Is Dynamic Currency Conversion (DCC)?

Dynamic currency conversion (DCC) allows you to make point-of-sale (POS) credit card purchases in a foreign country using the currency of your home country; it is also known as cardholder preferred currency (CPC). While DCC makes it easier to understand the price you are paying—an🧸d lets you avoid doing the currency conversion math—it often comes with a poor exchange rate and other fees that can make the transaction more expensive than if you simply made it🦋 in local currency.

Understanding Dynamic Currency Conversion (DCC)

If you've traveled abroad or shopped online on a foreign website, you're probably familiar with the fact that credit cards and ATMs charge a 澳洲幸运5开奖号码历史查询:currency conversion fee ꦿfor most transactions. Dynamic currency conversion (DCC) is simpl♏y one type of currency conversion fee.

Most currency conversion fees are levied by the credit card payment processor or ATM network. DCC fees are levied by the merchant, typically through a servꦐice pro🥂vider.

DCC transactions sound attractive because the currency conversion takes place in real time at the point of sale. Regular credit card currency conversions don't reveal the cost until you go online or receive your statement in the mail.

Unfortunately, the apparent transparency that you get with DCC comes at a stiff price. First, the exchange rate will include a markup to the merchant and/or service provider, making the rate much less attractive than the market rate at the time. Second, there may be additional fees. And finally, you will still have to pay a 澳洲幸运5开奖号码历史查询:foreign transaction fee to your card provider if it charges one.

DCC vs. Currency Conversion

Whenever you want to convert one type of currency into another there is usually a fee involved. When the conversion is done by a credit or debit card payment processor or an ATM network, the fee is usually 1% of the amount of the transaction. This conversion charge is often adde🐻d to the processor's𒆙 foreign transaction fee, raising the total cost to between 2% and 3%.

DCC is an optional service offered by foreign merchants at the point of sale that lets you see the cost of your purchase in your home currency, such as U.S. dollars. Unfortunately, DCC typically comes with a high currency conversion rate and additional fees that can make the transaction very expensive. One European study found exchange rate markups of from 2.6% to 12%. As DCC is optional, you have the right to dec🥂line it when offered.

If you agree to DCC when you make a purchase or withdrawal, that exchange will꧑ also be subject to any foreign transaction fee levied by your card issuer. This could result in fees of up to 7% or more.

Advantages and Disadvantages of DCC

DCC has advantages that some people may find helpful, but t🌸here are also downsides that could easily outweigh them.

Here are the details.

Advantages

• The exchange rate is locked in. DCC locks in the exchange rate at the point of sale. When you make a transaction and accept DCC, the exchange rate used is the current market rate plus a markup for the vendor and/or service provider. Normally, credit card exchange rates aren't locked in until the transaction is processed, usually days later. If the DCC exchange rate (including the markup) is better than the exchange rate when the transaction is processed, you could save money.
• You see the exchange rate in real time. If you opt for DCC, the currency conversion happens in front of your eyes, and you know the exchange rate you are paying immediately. Credit card companies are not required to disclose the exchange rate.
• It can make price comparison easier. As most people understand their own currency better, comparison shopping is likely easier with DCC.

Disadvantages

• The markup is unknown. Although DCC vendors are required to disclose the exchange rate, they are not required to disclose the markup above the current market exchange rate. Unless you have a currency exchange app, you may not know how much above the market rate you are paying.
• Transaction fees will still apply. People often believe that by selecting DCC at the point of sale, they won't have to pay the foreign transaction fee levied by their card issuer. This is not true. Most cards charge a fee on each foreign transaction that has nothing to do with converting the currency.
• The foreign transaction fee may be higher. If the DCC conversion rate is higher than that available through your credit card, your foreign transaction fee will also be higher. That's because foreign transaction fees are typically calculated as a percentage of the transaction amount.

How to Avoid DCC

As DCC is almost always more expensive than regular credit card currency conversion, it makes sense to avoid it. Theoretically that should be easy, as DCC is an optional service and you have𒊎 to opt in for it to take effect.

Your first line of defense is to "just say no." Decline DCC when it is offered. Keep in mind that the merchant will probably not call it DCC. Instead, you will be asked if you want the transaction in local currency or dollars. Choose local currency.

In addition to declining DCC, make sure the card you use does not charge a foreign transaction fee. (Many such cards are available.) That way the only fee you are likely to pay is the card's currency conversion fee.

The Bottom Line

When you're traveling abroad it is almost always more economical to make credit card purchases in the local currency. Dynamic currency conversion, which allows you to make them in your home currency, may appear to be a convenience but often comes at an exorbitant cost.