Dynamic Currency Conversion (DCC) is a service offered by some merchants and ATMs that allows you to pay for your purchases in your home currency, rather than the local currency. While this may seem like a convenient option, it can actually be a scam that costs you more money in the long run.

The Basics of DCC

When you use DCC, the merchant or ATM converts the amount of your transaction into your home currency at a rate that is typically higher than the spot exchange rate. This means that you are essentially paying a premium for the convenience of seeing the price in familiar terms.

In addition, DCC transactions often incur additional fees, which can further increase the overall cost of your purchase. These fees are typically charged by the merchant or ATM, and they are not disclosed to you upfront.

Why DCC is a Bad Deal for Consumers

The reason why DCC is a bad deal for consumers is that it is often a significant rip-off. For example, one study found that the average DCC markup was 4.5%. This means that if you buy something that costs 100 euros, you could end up paying an extra 4.5 euros simply because you chose to pay in US dollars.

In addition, DCC transactions often do not avoid the foreign exchange transaction fees imposed on the consumer by the credit card issuer. Even though you are now paying in the currency of the card, it is still a foreign transaction and still incurs the fee.

The Exceptions to the Rule

While DCC is generally a bad deal for consumers, there are some exceptions. For example, in some countries, DCC transactions may be subject to lower tax rates than transactions in the local currency.

For example, one reader reported that they saved money by using DCC to pay for a hotel bill in Chile. This is because the hotel was charging a 19% tax on transactions in Chilean pesos, but the bill in US dollars was not subject to that fee.

How to Avoid DCC

The best way to avoid DCC is to always decline the option when it is offered to you. This is typically done by pressing the "No" button when the merchant or ATM asks you if you want to "view transaction in your home currency."

If you accidentally agree to DCC, you may be able to cancel the transaction and pay in the local currency. However, this is not always possible, so it is best to avoid DCC altogether.

Conclusion

Dynamic Currency Conversion is a scam that can cost you more money in the long run. Always decline DCC when it is offered to you, and be aware of the exceptions to the rule. By following these tips, you can save money and protect yourself from this unfair practice.