The margins applied to Dynamic Currency Conversion are charged on top of any regular credit card international transaction fees. DCC adds expense without adding value.
“It’s one of those little ‘traps’ you only really learn through traveling a lot,” says Miriam Ferranin, a London-based frequent flyer. “The exchange rate is almost always unfavourable. Luckily, I realised this early on and now I always choose the local currency. But it’s not so intuitive … especially when you’re tired or in a hurry.”
Alex Stratikis, a British expat and travel company founder who’s spent years living (and spending) abroad, agrees. DCC “continues to mislead travellers into paying inflated overseas transaction costs. During a trip to Montenegro, I selected the local currency but was charged using Dynamic Currency Conversion regardless. The charge required my bank to recover the funds… after which, the Montenegrin bank withdrew further money, (requiring) my bank to intervene again.”
If the margins on DCC were more reasonable, and there was transparency around fees, it wouldn’t feel exploitative.
In fact, it could serve a practical purpose – especially for business travellers on expense accounts. Seeing the charge instantly in their home currency could streamline expense claims and make travel budgets easier to manage.
Instead, excessive markups have turned it into a profit play. DCC providers – and some merchants – rely on confusion, inattention and people being uninformed. They quietly extract more from customers under a guise of convenience.
“Originally, (DCC) was meant to (mirror) the foreign exchange charge that a card issuer would (levy) for an overseas payment: typically, 2.5-3%,” Phil Thomas says. Formerly director of banking operations at Lloyds with responsibility for DCC, and now a full-time traveller, Thomas adds that this price point “supported the argument that DCC gave clarity and transparency.”
But “last month in Spain … a shopkeeper offered me DCC with a 7% markup. Obviously, I declined.”
