What Is Dynamic Currency Conversion And How To Avoid Paying It (2024)

Dynamic currency conversion allows consumers to choose to use their home currency when transacting with retailers, restaurants and other services in foreign countries. Customers view a bill showing the cost in the local currency, their home currency and an offered exchange rate if they charge their credit card in their home currency. It may seem like an appealing offer to know how much you’re getting charged without manually converting the local currency yourself, but you could wind up paying more due to markups and hidden fees.

What Is Dynamic Currency Conversion?

Dynamic currency conversion (DCC), and sometimes referred to as cardholder preferred currency (CPC), allows customers to pay for a product or service in a foreign country using their home currency instead of the local currency. It involves a type of currency conversion fee similar to other fees credit cards or ATM cards may charge for converting purchases or cash withdrawals in a foreign country to your home currency.

Currency conversion fees are typically charged by the debit or credit card processor, like Visa or Mastercard, and run around 1% of the transaction amount. DCC is usually set by a merchant’s service provider that processes the exchange rate and any additional fees.

It might seem appealing when presented with a DCC opportunity in a foreign country because it’s convenient and removes the extra step of converting the transaction amount yourself from the local currency to your home currency. But using DCC can result in a more expensive exchange than charging your credit card in the currency local to your travel destination.

Should I Pay Using Dynamic Currency Conversion?

Any time you buy something from a store or restaurant, you’ll likely want to see the best deal possible. By avoiding paying the DCC charges and instead paying in a local currency, you can do just that by saving money on any DCC-related fees.

You should always have a choice of currency in legitimate DCC transactions. A bill should show the transaction amount in both your home and local currencies, plus the currency conversion rate that will be applied to your transaction if you choose to charge the purchase using the DCC.

For example, if you’re a U.S. citizen traveling in Paris, you might receive a tab that shows €30, $32.20 and an exchange rate of 1 euro = 1.07359 U.S. dollars (the rate as of November 2023; updated EURO to USD). At first glance, the DCC may look fine, but if you compare the DCC to the current market rate that your credit card processor would charge in a few days, you will likely find that charging your card in euros is cheaper than using the DCC.

DCC does have its advantages, but the disadvantages could quickly outweigh any benefits.

Advantages to Dynamic Currency Conversion

Paying the DCC in a foreign country has a few advantages.

• You’ll know what you’re paying upfront. Instead of waiting to see the total cost to your home currency on a bank statement, you’ll know how much a product or service will cost at the point of sale and won’t have to estimate what you’ll be charged after your issuer runs the transaction and reports it.
• It’s optional; merchants need your consent. Stores, restaurants and other services aren’t allowed to perform DCC transactions without consent. You can accept or deny DCC at any point of sale.
• Price comparison is easier. DCC could make shopping easier by allowing you to compare prices for different products in your home currency without having to do the extra legwork of converting costs yourself.
• The exchange rate is guaranteed at the time of purchase. When you accept DCC, the exchange rate offered that day is guaranteed at the time of purchase. If you decline DCC, your credit card’s currency conversion could happen a few days later when the transaction is processed. If you elect to wait, the actual amount will depend on the market rate that day.

Disadvantages to Dynamic Currency Conversion

DCC disadvantages may be enough to convince you to decline the option when shopping, dining or transacting in another country.

• There will most likely be additional fees. A service provider contracted by the merchant will typically process a DCC for any given transaction. The provider may charge its own fee plus a markup on top of the transaction cost.
• Merchants are not always required to reveal additional fees. You may not know exactly how much more you’re paying when accepting DCC unless you calculate the costs yourself by comparing the market rate to the exchange rate provided by the merchant.
• Your purchase could end up being more expensive. Because of the extra fees, the DCC’s exchange rate provided on a transaction receipt or at an ATM is typically worse than the market rate resulting in a more expensive purchase.
• You still have to pay transaction fees. If your credit or debit card charges foreign transaction fees, you’ll still be required to pay that fee on top of the fees associated with a DCC. This fee will apply even if your transaction is listed in U.S. dollars because you’re still using the card in a foreign country.

How To Avoid Paying Dynamic Currency

Avoiding a DCC is easy—all you have to do is decline when given the option at a store, restaurant or ATM in a foreign country. Rejecting the DCC will ensure you’re not paying more than you absolutely have to.

A DCC should always be an option. If you don’t have a choice, the merchant may not be following the rules outlined by the credit card processor and even by the local government.

For example, if you withdraw money at an ATM, you should be given a choice to accept or reject a conversion provided by a third-party service. Similar to making a purchase, the ATM should show the requested withdrawal amount in the local and home currency, plus the conversion rate that will be applied if the DCC is accepted. We recommend rejecting this type of conversion at an ATM in a foreign country. You should still be able to take out cash, but your bank will handle the conversion at the current market rate. If you cannot take out cash without conducting a DCC transaction, find another ATM.

Other ways to save money while traveling include using a credit card that does not charge foreign transaction fees and using a currency-converter app to make a quick money conversion before making a purchase.

Bottom Line

Knowing how much you’re paying in your home currency at the point of sale has its advantages, but you’ll often end up paying more than necessary due to poor exchange rates and unclear fees often found with dynamic currency conversion. Instead, charge a credit card using the local currency and using credit cards with no foreign transaction fees to stay on budget while traveling. Use debit cards without foreign transaction fees to withdraw cash, as cash advances are inadvisable and expensive.

Frequently Asked Questions (FAQs)