Dynamic Currency Conversion Costs

Dynamic Currency Conversion: the “choice” that usually costs you more. You’re in Paris with your Visa. The card terminal asks: “Pay €120 in local currency? Or $132 in your home currency?” That second option is called Dynamic Currency Conversion (DCC). The idea sounds consumer-friendly: see the price in your own currency before you confirm. But here’s the catch. Normally, Visa, Mastercard, or American Express convert the payment using their wholesale FX rates, the same rates banks use globally. With DCC, the merchant’s terminal or ATM steps in, applies its own rate, and adds a markup of 3–8%. That markup isn’t random. It’s split between the DCC provider, the acquiring bank, and the merchant. The traveler pays the premium. If Mastercard’s rate turns €120 into $128, the DCC screen might show $132. Those extra $4 don’t vanish. They become revenue inside the payments chain. For merchants, it’s income. For acquirers, it’s a product. For cardholders, it’s almost always a worse deal. Regulators know this. In the European Union, terminals must now disclose the exact markup before you make a choice. DCC isn’t really about clarity. It’s about control, who sets the FX rate, and who keeps the margin. And for global or high-risk businesses, it’s another reminder: Every payment rail has hidden economics, and knowing where the margin sits can make or break your strategy. Have you ever noticed the DCC option when traveling, and do you take it, or stick to local currency? #Payments #Fintech #Visa #Mastercard #AmericanExpress #CrossBorderPayments #Banking #RoanDollmann

The Hidden Cost of “Paying in Your Currency” Abroad Dynamic Currency Conversion (DCC) lets travelers pay in their home currency at foreign merchants, but this convenience often comes at a steep price. Let’s unpack how it works and why savvy shoppers opt out. How DCC Works: A Tourist Trap? When you swipe your card abroad (e.g., a Euro card in Dubai): The POS terminal detects your foreign card and pings the acquirer (like Worldpay). The DCC provider calculates the exchange rate + a 3-7% markup (Visa). You choose: pay in AED (local) or EUR (home currency). If you pick EUR, the merchant pockets the markup, costing travelers $4.6B annually (McKinsey). The Fine Print Most Miss Card networks mandate transparency, but loopholes exist: Pre-selected DCC: 40% of ATMs default to home currency, hiding fees until checkout (Juniper). Biased UX: Buttons like “Pay in EUR” (green) vs “Continue in AED” (red) nudge users toward markups. Neobanks Fight Back Challenger banks like Revolut and Wise block DCC by default, routing transactions through their own low-margin FX rates. Result? Users save 5-8% per transaction compared to traditional banks. Why It Matters DCC isn’t inherently evil—it’s about informed choice. Yet 68% of travelers don’t realize they’re paying extra (Statista). Always: ✅ Decline DCC and let your bank handle conversion. ✅ Use multicurrency cards (e.g., Wise, N26) for near-interbank rates. Next time you travel, remember: “Pay in local currency” is the golden rule. IF you want to learn how to build your neobank - Check the comment. Source: Roger Abouantoun Stats: Visa, McKinsey, Juniper, Statista #DigitalPayments #Fintech #DCC #TravelHacks

💡 Pro Tip: When traveling abroad, ALWAYS pay in the local currency of the country you are visiting. Do NOT accept any offers by the vendor to give you the "convenience" of paying in your home currency. Real Story: In Cabo San Lucas this summer, a restaurant offered to charge me in USD instead of Mexican Pesos for my "convenience." The hidden cost? A lovely 15% markup that would have added $50 to my bill! The flan and tamarind margaritas were just fine but not worth the additional $50... What you need to know: ▪️ This sneaky practice is called Dynamic Currency Conversion (DCC) ▪️ Merchants profit from tourists who don't know better ▪️ ALWAYS choose to pay in the local currency ▪️ The same rule applies to ATM withdrawals abroad 💳 Pro Tip: Many credit cards already waive international transaction fees. I personally use Marriott Hotels and United Airlines cards when traveling overseas - zero extra fees! Remember: When someone offers you "convenience" while traveling abroad, check your wallet - it usually comes at a premium. Don't let them get you! #BusinessTravel #ExpenseManagement #TravelFinance

Should I accept Dynamic Currency Conversion (DCC) when shopping abroad?   Well, this is a generic question and there isn’t a standard answer to it. The decision depends on many factors.   -> Before you travel you should always check with your card issuer if they charge a ‘foreign transaction fee’ for transactions processed abroad. These usually range between 2% to 4%   If they do charge a fee, is it applied to:   (a) ‘ALL transactions’ taking place abroad (whether you opt in or opt out of DCC)? Or (b) Only transactions processed in the foreign currency that are opted out of DCC?   - If (a), then accepting DCC may cost you more overall (as you will be paying the 'foreign transaction fee' set by your bank + any applicable fees by the DCC provider).   - If (b), then using DCC can avoid the foreign transaction fee and may be worth considering further.   Now, when selecting DCC you need to consider a few things:   1. Visa issued cards   The merchant must display the following DCC details to comply with Visa rules:   a - Purchase amounts (foreign and local) - with currency symbols b - Exchange rate c - Source of the rate d - Additional fees (markup)   (c) and (d) are key factors driving your decision.   (c) If the merchant is using the ‘scheme wholesale interbank rate’ then you are in good shape. This is the real rate that is used by the card associations daily, and the same rates normally used by your issuing bank to convert your transactions. Anything other than this may include hidden markups and should be avoided.   (d) A competitive DCC markup ranges from 1% to 4% over the 'wholesale interbank' rate. Anything higher than that might be an expensive proposition. I advise you to check with your issuing bank (before travelling) how much they mark up their rates so you can make an informed decision.   2. MasterCard issued cards   It’s more challenging here as MC rules do not require (c) and (d) to be displayed on the offer screen to comply with their regulations.   As a consumer, you have access to interbank rates daily through various financial websites. This allows you to compare these rates with the exchange rates offered, so you can make a more informed decision. If you’re planning a large purchase, it may be worth running trough this exercise. You could always ask the merchant for those details, while not always available some may be able to help. #DynamicCurrencyConversion #DCC

🚀 Understanding Dynamic Currency Conversion (DCC): Should You Use It? 💳💱 Ever been offered the option to "Pay in Your Own Currency" while traveling abroad? That’s Dynamic Currency Conversion (DCC) in action! While it seems convenient, it often comes with hidden fees and unfavorable exchange rates. ✅ How it works: 🔹 When you pay at a POS terminal, ATM, or online, the merchant offers you the choice to pay in local currency or your home currency. 🔹 The exchange rate and markup are calculated by the acquirer’s DCC provider, not Visa or Mastercard. 🔹 If you choose DCC, the conversion happens instantly—but often at a higher rate than your bank’s standard FX rate. 🚨 What you should know: ❌ Merchants cannot preselect DCC or influence your choice. ❌ Always compare the exchange rate + fees before deciding. 💡 Tip: Paying in the local currency is often the better deal! Have you used DCC before? Share your experience in the comments! ⬇️ by Darshana Manikkuwadura (Dash)⚡️🇬🇧 🇱🇰⚡️ #DigitalPayments #CardPayments #DCC #PaymentsProcessing #Fintech #POS #Visa #Mastercard #eCommerce #darshanamanikkuwadura

Just say no to dynamic currency conversion and protect your wallet while traveling! Traveling abroad is an exciting adventure, but navigating foreign currencies can be a challenge. In my recent Bankrate article, I share insights on why saying no to dynamic currency conversion (DCC) can save you money. Even if you have a no-foreign-transaction-fee card, opting for DCC can lead to unnecessary charges. Though it seems convenient to see transactions in your home currency, this comes at a cost, often with high markups. In fact, British travelers alone have faced £500 million US$624 million) in DCC fees a year! Having learned the hard way during a trip to Morocco, I now always choose to pay in local currency. Avoiding DCC ensures you're not overpaying just for the ease of seeing charges in your currency. BECU advises: Always pay in the local currency. While the European Commission has increased transparency rather than banning DCC, being informed helps you make the best choice. Let’s travel smarter and keep those extra pennies for more adventures! https://lnkd.in/exd-VBnj

#Awareness for #Card_Users: Should You #Choose_Home_Currency or #DCC Dynamic Currency Conversion? 💳🌍 When using your card internationally—whether at a store’s POS terminal, ATM, or online—you often get a choice at checkout: pay in your home currency or the local currency with Dynamic Currency Conversion (DCC). 🤔 What is #DCC? 🔄 DCC converts the amount to your home currency instantly at the point of sale, showing you exactly what you’ll be charged. It may feel reassuring because you know the cost right away. ✅ What is Paying in Home Currency vs Local Currency? 💵 vs 🏦 • Paying in Local Currency: The transaction is processed in the merchant’s currency, then your bank converts it later at its exchange rate. • Paying with DCC (at POS or ATM): The conversion happens immediately during the transaction with an exchange rate marked up by the DCC provider, merchant, and acquirer. How Does POS Transaction with DCC Work? 🏪💳 1. Your foreign card is detected at the POS terminal or ATM. 2. The system offers the choice to pay in your home currency or local currency. 3. If you choose home currency (DCC), the amount is converted immediately at the displayed exchange rate with any markups. 4. If you decline, the transaction processes in local currency and your card issuer converts it later. What Should You Choose? ❓ • Cost:
Paying in local currency and letting your card issuer convert usually results in lower overall costs since DCC rates often include markups that make the transaction more expensive. 📉 • Transparency:
DCC shows the charge in your currency right away, which can help with understanding costs and budgeting during travel or international purchases. 🕵️♂️ • Beware of Markups:
DCC providers can add a markup ranging typically from 2.6% to over 10%, meaning you often pay more compared to your issuer’s currency conversion. ⚠️ • Choose Wisely:
 If saving money is a priority, generally select to pay in the local currency and let your bank handle the conversion. If you prefer certainty about the exact charge at the time of payment, DCC offers that visibility but often at a higher cost. 💡 Pro Tips: 💡 ✔️ Always read the payment screen carefully before accepting DCC ✔️ Ask the merchant or ATM operator if unsure ✔️ Use cards with no or low foreign transaction fees to save more 💳 Make smarter choices and avoid unnecessary extra costs on your international payments! 🌐✈️ Picture : Collected #infoabed #CurrencyConversion #DCC #POSPayments #InternationalPayments #TravelSmart #CardPayments #Forex #FinancialAwareness #MoneyTips #SaveMoney #Fintech #PaymentSolutions #TravelFinance