When you're traveling abroad, it's important to be aware of the hidden fees that can be associated with using ATMs. One particularly insidious fee is Dynamic Currency Conversion (DCC), which is a scam that allows foreign ATMs or card machines to convert your transaction into your home currency at an inflated exchange rate.

How DCC Works

When you use an ATM in a foreign country, you may be presented with the option to be charged in your home currency. This may seem like a convenient option, as it can make it easier to keep track of your spending. However, it's important to avoid this option at all costs.

DCC is a scam because the exchange rate that the ATM offers is usually much higher than the real exchange rate. This means that you'll end up paying more for your purchases if you choose to be charged in your home currency.

How to Avoid DCC

The best way to avoid DCC is to always choose to be charged in the local currency of the country you're in. This will ensure that you're getting the best possible exchange rate.

Here are some additional tips for avoiding DCC:

• Be aware of the DCC scam before you travel. Do some research online to learn how DCC works and how to avoid it.
• Look for the option to pay in the local currency when you're using an ATM. This option may be labeled as "local currency" or "EUR".
• If you're not sure how to avoid DCC, ask the ATM operator for help. They should be able to explain the different options and help you choose the best one for you.

The Math Behind DCC

To illustrate the impact of DCC, let's consider two examples:

Case 1: Using a UK card in Spain

• You withdraw 20 EUR from a Spanish ATM using your HSBC debit card from the UK.
• The ATM offers to convert the transaction into GBP at a rate of 0.8375.
• You reject the DCC offer and are charged 16.44 GBP.
• The real mid-market exchange rate at the time was 0.8234.
• Using the real rate, you should have been charged 16.79 GBP.
• By rejecting DCC, you saved 0.35 GBP (2%).

Case 2: Using an EU card in the UK

• You withdraw 100 GBP from a UK ATM using a EUR card issued by an Estonian bank.
• The ATM offers to convert the transaction into EUR at a rate of 1.3551.
• You reject the DCC offer and are charged 126.12 EUR.
• The real mid-market exchange rate at the time was 1.2601.
• Using the real rate, you should have been charged 126.01 EUR.
• By rejecting DCC, you saved 9.50 EUR (7%).

Conclusion

DCC is a scam that can cost you a lot of money if you're not careful. By following the simple rule of always choosing to be charged in the local currency, you can easily avoid this scam and save yourself money.

Here are some additional tips for saving money on ATM fees:

• Withdraw larger amounts of cash less frequently. This will reduce the number of times you're charged an ATM fee.
• Consider using a travel credit card that doesn't charge foreign transaction fees. This will save you money on every ATM withdrawal.
• Shop around for the best exchange rate before you travel. There are a number of online tools that can help you compare exchange rates.

By following these tips, you can save yourself money on ATM fees and make your travels more affordable.