I’ve been spending some time abroad in the last week and earlier this afternoon I overheard an interesting conversation.

I was picking up a few bits of shopping at a local shop and caught the tail end of a conversation between the shop assistant and a middle-aged couple. They’d been asked whether they’d like to pay for their shopping in pounds or euros. It seemed that after a bit of back and forth they’d decided that as their card was a UK card, it was surely better to select pounds.

But they couldn’t have been more wrong.

Meet Dynamic Currency Conversion

Dynamic Currency Conversion (DCC) is essentially a method that allows Visa or Mastercard holders travelling overseas to choose whether they want to pay for a purchase using the local currency or their card’s ‘home currency’.

If you choose to pay in your card’s home currency, the merchant will convert the amount for you.

This creates three ways in which you can be stung by this:

1.) The exchange rate

This is the obvious one. You are hardly going to be given the Mastercard exchange rate and this is a great opportunity for the provider of the DCC (be it the merchant or their third party credit card processor) to add a hefty markup to your bill.

2.) Processing/services fee

Like any good service, the option to use DCC may be accompanied by a processing charge. However, in order not to complicate things, the merchant/card processor may conveniently choose not to disclose this fact to the customer and will just slip it into the final amount displayed onscreen.

3.) Regular foreign transaction fees

And here’s the most galling of them all. As a UK cardholder, you may assume that having chosen to pay in pounds, your purchase would be treated in the same way as a sandwich from your local Pret. Not always. Many card companies will charge you for using your card abroad. There’s no requirement for that transaction to then be in a foreign currency.

DCC is not limited to in-store purchases either. Some ATM’s will offer you the choice when withdrawing cash and various online shopping websites will do the same. You should also be extra careful of this when it comes to settling hotel bills.

Why would you want to use DCC?

I presume most of the time it is simply the convenience factor. Most banks/card companies take a few days (longer than regular transactions) to process foreign currency transactions.

The temptation of knowing on the spot what this transaction will cost in your home currency is likely the chief motivation for people to use DCC.


The bottom line is this:

Always instruct a vendor to charge your card in the local currency.

To avoid paying any foreign transaction fees, you’ll want to ensure that your card doesn’t charge for making purchases abroad. If you’re unsure of the right card to use, our recently updated “best card to use abroad” feature has you covered.

Have you ever been on the wrong end of Dynamic Currency Conversion?



This site uses Akismet to reduce spam. Learn how your comment data is processed.