Dynamic Currency Conversion (DCC)
When merchants abroad offer to charge your card in your home currency instead of local currency, usually with hidden markup of 3-7%.
What You Need to Know
Dynamic Currency Conversion is a sneaky way merchants and ATMs abroad try to make extra money by offering to convert prices to your home currency at the point of sale.
How the Scam Works:
- You buy something in Paris for €100
- Merchant asks: "Pay in euros or dollars?"
- If you choose dollars, they convert at a bad rate (€100 = $115)
- Real rate would be: €100 = $110
- You just lost $5 (4.5% markup)
Why Merchants Love It: They get a kickback from the conversion company—typically 1-2% of every transaction. That's why they push it so hard.
Red Flags:
- "Would you like to pay in your home currency?"
- "Lock in today's exchange rate"
- "See the exact amount in dollars"
The Right Answer: ALWAYS choose to pay in local currency. Let your credit card company do the conversion—they get better rates and don't add extra fees (if you have a no-foreign-transaction-fee card).
Real Example:
- Restaurant bill: €150
- DCC rate: 1 EUR = 1.15 USD = $172.50
- Real rate: 1 EUR = 1.10 USD = $165.00
- You lose: $7.50 on one meal
The Bottom Line: Dynamic Currency Conversion is a trap. Always decline it and pay in local currency. The "convenience" of seeing your home currency costs you 3-7% every time.
Sources & References
This information is sourced from authoritative government and academic institutions:
- federalreserve.gov
https://www.federalreserve.gov/supervisionreg/topics/consumer_protection.htm
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