Dynamic Currency Conversion in China
 

I just came back from China, where I encountered dynamic currency conversion.

An especially egregious example was with a hotel. I checked with them at that time and they assured me the charge would be in Chinese yuan, but there was a USD equivalent that is now exactly the amount that's on my statement.

I'm guessing the implied fee is around 3%. So that's around $25-$30. It's not a huge amount, but I called my cc company and I just called the hotel. The cc company was a little confused at first, but then the rep agreed that the only amount showing on their side was USD, whereas for typical foreign transactions, they would have a foreign currency amount and a USD amount.

They offered me two choices. I could file a dispute with the cc company or call the hotel. I chose to call the hotel first.

This is a matter of principle to me and it's important for me to get my money back -- especially when I have my charge slip where I especially notated I wanted to pay in Chinese yuan (so I could have the cc company convert the amount).

So be aware of this scam in China. I think that there are other smallish charges where this happened, but it would not be worth my time to dispute the charges. Plus it's easier for me to work this out with a reputable hotel that must care about customer satisfaction.

This seems to be very common in Europe as well. It is always much more economical to have the charges in the local currency.

As usual it is tourist beware.

This can happen anywhere world-wide. Note that your credit card company usually charges you 3% for use of a credit card in a foreign country. So if the difference was 3%, you probably broke even. While I have usually avoided dynamic currency conversaion, I had a gallery owner offer it to me once where it was to my advantage, so I toook it. But you have to know exactly what exchange rate they are charging you and what foreign currency charges you bank charges you.

I think my problem is that despite my attempts to get them to use Chinese yuan, I was just unable to do so. So it wasn't my being unaware and being taken in.

I'm reviewing my charge slips and there's a case when I was offered CNY or USD and I was asked to mark the desired currency. I chose CNY but I was charged in USD anyway. That amount is around $70 or I guess the overcharge is a few dollars. I'm not going to dispute that one.

The charge slip for the hotel indicates that I was given a choice of currency and that my choice was final, and I can tell you that this was definitely not the case. I expected that this would happen, so I especially circled RMB on the slip.

I'll see how this gets worked out.

What are some preemptive measures that one could take? (Apart from taking large amounts of cash from an ATM, which seems awfully impractical.)

Kathie, I stopped using my Citi cc a long time ago when I discovered the 3% tag on (or maybe it was even more). I believe that my current cc charges no extra fees beyond what's customary.

To compare, the hotel's exchange rate was around 6.6 and the other charges were billed at around 6.8. So that should be around 3%.

I think it's rare to have an advantageous exchange rate. I've never seen it happen.

I think it's rare to have an adventagous rate on dynamic conversion as well. It's only once I had it happen, so I thought I'd mention it.

There is only one credit card I know of that that doesn't charge for currency conversion (Capitol One - and only some of those cards); it only charges the 1% rate required by Visa. So do see what your card charges - as "customary" these days is about 3%.

Hi Kathie, I don't have that particular card (yes, there are others with no fee), but I'm pretty sure that customary for my card is not 3%.

As I indicated above, I worked out the implicit exchange rate for my cc and compared it against the one for DCC, which is about 3% worse. And since it's not the first time I've done this particular calculation and it's also not the first time I've used this card overseas, I'm quite sure that the fee for my card is not 3%.

One thing I could never figure out is whether the actual fee is 1% or 0%. I think Visa/Mastercard charges 1% and the cc company can charge something beyond this. I believe that for this particular card, I don't pay anything beyond what Visa/Mastercard charges, but I could be wrong about this.

I was suggesting that you check with your card company about their charges as many cards have recently changed their charges in advance of the new federal laws taking effect. I re-check fees on all of my credit cards and ATM cards about a month before each big trip. It seems like there is always some change... and typically for the worse!

Why is there such a need? I've already checked all my charges online. Maybe there's such a need for the next trip, but certainly not for the trip that's already taken place.

I'd dispute with the CC company any of this scam. Even if it's just for a penny.

Well I guess you have more time than I do. :)

I just got a call from the hotel and they are claiming that it was the rate set by the cc company. Needless to say, I'm skeptical.

After their call, I checked http://www.oanda.com/convert/fxhistory .

The USD-CNY rate hardly changed at all over a rough two-week period starting Sept. 22, 2009. My understanding (I could be wrong about this) is that USD is basically depreciating against Chinese Yuan at a slow and steady pace and that China is ensuring that the exchange rate is moving within a small band every day. The depreciation of USD is obvious only within a very long period (i.e. years, not weeks).

So it's hard for me to see how the rate can actually fluctuate within 3% over 2 weeks, and Onada doesn't show this either.

Here's a small list of transactions for comparison:

Sept. 26: 477 yuan, $70.06 (exchange rate = 6.80845).
Sept. 29: 374 yuan, $54.93 (exchange rate = 6.80866).
Sept. 30: 84 yuan, $12.34 (exchange rate = 6.807131).

I'm still waiting for a final charge on Oct. 5 to show up online.

Then this is what happened with the DCC transactions.

The hotel charge was 6027.84 yuan filed on Sept. 27, which appeared as $910.72 (exchange rate = 6.62253).

There were two other charges were billed at DCC rates.

One was at a Din Tai Fung restaurant (283 yuan = $42.79, with rate of 6.613695). The other was at Lei Garden (which is a reputable Cantonese restaurant that's actually a chain: 472 yuan = $71.74, with rate of 6.579314).

Now that I'm checking this in detail, the Lei Garden charge seems especially egregious too -- this was the one that offered me two boxes to choose from (CNY or USD) and I marked CNY, but I was billed the USD amount that appeared on the charge slip. DTF never offered a choice but had the same disclaimer on the charge slip that I was offered a choice and that my choice was final (just as in the hotel's case). This was what first alerted me to DCC.

One ATM withdrawal on Sept. 22 of 2000 yuan appeared as $292.87 (exchange rate = 6.828968).

Unfortunately I don't have multiple cards and multiple transactions in one day to cross check transactions. But I'll call my cc company again to have them try to dispute the charges.

Ok, I called the cc company and filed the dispute.

One thing I should add: There really are a lot of scams in China!

I'm reviewing my charge slips again, and unfortunately for the Lei Garden charge, there's disclaimer like this: "I have chosen not to use the Mastercard currency conversion process and agree that I have no recourse against Mastercard concerning the currency conversion or its disclosure."

I did tick the CNY box, but I now wonder if this is actually disputable. I didn't notice the disclaimer at that time, thinking that if I chose CNY, I'd be using the Mastercard conversion rate. On the other hand, there probably would have been no other way to settle the charge with a cc.

With the hotel's charge slip, this disclaimer appears: "I declare that I have been offered a choice of payment currencies and my choice is final." As I said, this was definitely not the case.

I'm curious: Is the markup in DCC credit-card machine dependent? My hotel charge slip was a Bank of China charge slip and the Lei Garden one was HSBC/China. Din Tai Fung also used Bank of China.

I guess I should have disputed the DTF charge while I was at it, but I didn't do so.

You've done your research. The DCC is certainly not to your advantage.

I wonder if your charge ships showing you had chosen CNY would help. The disclaimers on the charge slips indicate to me that LOTS of people have disputed their charges!

Well we'll see. I mean, this is really a scam because the "choice" is not real.

Which brings me to that question I first asked -- is there a way to preempt DCC? It seems like there's no way if that's the way that the cc machines are set up to bill. Who wants to carry huge loads of cash?

And who benefits? Does the merchant get a cut?

It's not that I have more time than you do, but that's your best chance of getting anything done to yourself and others. Calling the hotel is totally useless, as you've found out.

My experience with disputing with credit card depends. AE's usually on my side on most issues. Other cards not so much.

Well, there should be a way to preempt DCC, and your credit card slips shows that they are supposed to ask and abide by your decision. That's in theory. In practice? Well, you are discovering that at the places you used your card, they opt for DCC even if you don't. I assume both the bank and the merchant get a cut.

When I've been asked about DCC, my choice has always been honored. But that w asn't in China.

Well I called the hotel because it's a nice hotel and I always believe in hearing the other side's story -- just in case I'm wrong. If there's a way for them to right the wrong, I'd rather they do it rather than go into a dispute. To their credit, they did call me back at least, so even if it's useless, they are very polite and nice.

But now I have actually disputed and I'll see what comes of this. My cc asked me to estimate the credit and I said $25-$30 and the rep actually said that she could offer me a $25 credit. I told her that I would take the credit later after this has been investigated.

It's not the $25-$30 that irks me obviously. It's the scam I'm annoyed by. As I said, this is just a matter of principle and I don't think that these scams should exist.

there is a very easy way to avoid all of this and be happy with the results: pay cash and do so by atm withdrawals, especially for things like restaurant bills..

i'm sorry to say but this all seems a little over the top to me....rates change minute to minute and your cc is charged and converted at the time the transaction is received by the card issuing bank....on the same day you can have many different rates.... i use multiple cards and i never see the same rate for transactions done on the same day... they can be all over the map...

on the up charge i find that those of my cards that did not charge a fee, they are now starting to...in fact two have notified me this week of it and recently a couple more increased the fee to 4 and 5%...

there are some banks around that are still not charging anything or else they refund the bump to you, but i bet that won't last long... its annoying, but i have to just shrug my shoulders....after all they are profit making businesses and are entitled to make money and charge fees....they have to pay for the processing of these transactions too, through the clearing houses...

best bet, check out your credit union....

i opened a second account with capital one and they won't give me more than a $1000 credit line on this one, so what good is it....i continue to use the other one...

I know this can seem over the top and it seems like I am whining, but I think that this is the sort of thing that if people don't complain, merchants will just think that they can get away with it.

I also understand that exchange rates can "seem all over the map," but I do believe that Chinese yuan is a special currency, as I mentioned before. Plus a rate shouldn't fluctuate by 3% within a period of days unless there happens to be some kind of central bank action. Exchange rates just don't behave like equity prices.

It's a bit hard to do an ATM withdrawal for a $900 hotel bill. Plus hindsight is always 20-20 -- I mean, I was not expecting to encounter DCC in China. If I were, I might have planned differently. Plus I was checking out at 5:30 am -- I wasn't about to run to a bank to withdraw all that cash.

Banks are of course entitled to charge some fees, but it's in the consumers' interests to try to ensure the fees are as low as possible. Their profits are *our* money. If we don't fight, who will?

111... do you live in cambridge or some other socialist community? "consumers interest"???

No, I believe in capitalism.

Also the other thing I find irksome about this whole thing are the disingenuous disclaimers. I mean, if I was never offered a choice, why does the disclaimer say that I was offered such a choice? Not only that, there's really no other way other than what's offered.

At least be honorable when you're trying to scam someone!

hey...its china, what do you expect....did you not expect for them to try to squeeze every penny out of you? their honesty is different than in the usa....i learned that a long time ago...

ever been to italy? or turkey or worse still russia...

all you are doing is raising your blood pressure over something that represents 3% or less of your entire expenditures for the whole trip....think of it this way: on the plane that took you to china, i bet there were no two people who paid the same amount for their tickets....do you bombard the airlines with complaints and work yourself into a stew over it?? no its expected and so are over charges in many overseas places we travel to...

i'm going to bed and hope not to worry about your 3%... i suggest you do the same if its bed time where you live...bon soir

Oh believe me, my blood pressure is not rising because of the 3%. I may sound indignant, but I do understand that there's a Chinese way of doing things. As I said, it's not the 3%. It's the principle.

I'm going to try to pursue this to see if I can get some money back. I think that most people think like you, which is why merchants and banks get away with these outrageous charges.

I'm a little jet-lagged so I'm organizing my photos and also waiting to call a friend on the west coast. I'm not staying up worrying about my 3%.

Regarding the multiple prices paid by different people, I encountered this in Beijing. I wouldn't have known, except that one hotel I stayed in printed my receipt on recycled paper. Initially I thought that they had a mistake because the name wasn't my name until I realized that they had actually printed my receipt on someone else's.

So I saw this first hand. The local had something like a 15-20% discount.

Needless to say, I was annoyed. But I find this more acceptable in this case because after all, I'm not a local and I didn't have the time or the familiarity to research the best deals I could possibly have gotten.

But at least I bought the Beijing-Hangzhou flights on Travelzen and not Expedia!

DCC is an entirely different beast, in my opinion. Credit card usage is international and China should be no different. Plus there's probably a language issue so this scam is easier to carry out in China.

Oh, for what it's worth, I've been to Italy many times and I never encountered DCC there.

I was in Istanbul once.

In my opinion, the big problem there (Italy and Istanbul) was the cab drivers with doctored meters who may not be scrupulous.

In China, I rarely encountered dishonest cab drivers. The only time I felt I was taken for a ride was in Beijing where the cab fare ran to over 20 yuan for what should have been a short distance (the female driver kept insisting that there was no way to turn). But that's really a small price anyway.

We did have one annoying incident in Hangzhou. I'll get to that if I ever get to writing a report.

During our recent trip to China, we paid cash for everything to avoid the 3% cc charge. I used and ATM card, B of A, that had an arrangement with China Construction Bank, so there was no fee. Consequently, no transaction fees whatsoever.

<<<It's the principle>>>

Why try to apply YOUR principle to others. Either you don't subject yourself to their principle or just write it off as part of the cost for your trip for gaining an experience.

Keep in mind that some banks are starting to charge an extra percentage (over the 1% standard Visa or MC fee) for foreign ATM withdrawals. Watch out for it.

With DCC on credit card purchases, not only do you get a lousy exchange rate from the merchant, but you still pay the Visa/MC 1% for foreign transactions plus whatever your credit card issuer chooses to add--which could be nothing or up to 3%.

My bank charges nothing extra for foreign ATM withdrawals, and my credit card issuer charges nothing extra for foreign purchases--they only pass on the standard 1% Visa/MC fee. I get a 1%-3% rebate on my credit card purchases, so I at least break even--I never accept the DCC option, and always check my receipt to make sure the merchant didn't make a "mistake" and use DCC when I didn't want it.

I'll write it off if I can't get the $ back. In any case, why should I subject my principle to the DCC principle -- which is basically a scam principle?

Honestly, that just seems like a ridiculous proposition.

Plus, as I said, I was never presented with a real choice.

Needless to say I really can't fathom the philosophy held by some Fodorites, while I'm sure that I must appear rather unfathomable to many of you also. :)

But honestly, I can't figure out why people think that throwing $ and being scammed is basically a-ok. I don't think it's ok, but that's just me.

Don't get me wrong. Nobody thinks that throwing $ and being scammed in OK.

My point is that you operate on your principle that everything is clear and the choices are presented to you in a honest manner. However, other people might operating with a different principle such as scamming a tourist as much as possible. I believe that happens everywhere under different forms even legal and supposedly "honest" forms (overpricing, user's fees, monopoly, tipping, service charge, prizes, sales, etc.) that you have no choice but to accept it even that you know full well that it is a scam.

If you deal with a reputable hotel chain than you might have a chance of making your argument. Otherwise, it is not worth the effort to reverse the scam.

On the other hand this could be an honest mistake by the hotel clerk. In that case you would have a very good chance to sort it out and get your money back. But how do they reverse it now, if the charge is in Yuan, what conversion rate will you cc company charge you? the current rate or the rate on the day the transaction was made?

The best way is trying to do research on forums like this and learn about these scams ahead of time and avoid it thereby minimizing the chance of subjecting yourself to "other operating principles".

Thanks to postings like this one where you took the time to warn other travellers, we now know of this potential scam and hopefully can deal with it.

Thanks for your clarification. Of course one of my intentions of posting this was to alert fellow travellers to this scam.

I'm well aware of DCC and have encountered it in the past and have read about it here as well, but I have never encountered it in such a rampant and inflexible form as I did in China.

As I mentioned the hotel did call me back. I don't think that there's anything they can reverse on their side. So the credit card company has to deal with them in a formal dispute.

If it gets resolved, I suspect that transaction (now in USD) will get voided, and a new transaction will get posted in yuan and converted at the now prevailing exchange rate. Of course, this is not necessarily in my favor. If they can resolve this quickly, I think the difference in exchange rates is quite trivial, as I mentioned that my understanding is that China exerts a strong hand in maintaining the USD-CNY exchange rate but where CNY appreciates at a steady pace against USD. Over a period of days, the exchange rate difference should be negligible for small transactions.

This is just an intelligent guess based on experience. I once had Ibis in London void a charge and issue a credit. The exchange rate actually moved in my favor when the credit was billed at the then prevailing rate.

In any case, I'd not mind paying more than I did had I stuck to DCC initially because I do believe that something should be done to stop this scam. If more consumers complain and reject this scheme, it can't survive.

In any case, just in case this was lost in the long posts, I should reiterate at Din Tai Fung and at the hotel, I clarified if the charge was in yuan first before signing. In both cases, they affirmed that that would be the case. The scheme at Lei Garden was even more disingenuous. Choosing CNY explicitly had no effect.

The hotel, in their call back to me last night, asserted that they had no control over the exchange rate and this was established by my cc company. I think that that's just false, but I'm giving them the benefit of the doubt and attributing that to their seeming ignorance of how DCC works.

The merchant is probably being muscled into choosing DCC by the bank with whom they have their credit-card agreement.

Whatever it is, this does seem to be the norm in China. I found another receipt where I was given a chosen of CNY vs USD, but when I marked CNY, I was charged the USD amount anyway.

I should follow up with the cc company to see where they are on this.

Bank of China Scam

Just returned from a trip from Hong Kong and China

In HK, all the charges are in HK $, thus avoiding the 3% Dynamic exchange fee. The only one that charge Dynamic exchange fee is Bank of China subsidiary that process Visa CC transactions.

In China, things gets really bad. Each time I ask to be charged in RMB, it came out to be in US$. After protest, it still come up with a statement saying that I was offer to reject the US$ option (which I did not). The bank say all I have to do is to cross out the option line and all the fine prints and I will be fine and will be in RMB. When I came home and check my statements, it all had the 3% Dynamic Exchange rated added onto my Schwab Credit card.

It is a big scam by Bank of China.. Be careful when you use credit card in China.

All my charges including Shangri-la are in US $ even I crossed out all the options in the US$ option, also wrote big sign as RMB. Is you want, I can eMail you the credit card slips.