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Confusion on "Dynamic Currency Conversion"

Confusion on "Dynamic Currency Conversion"

Old Mar 31st, 2008, 12:32 PM
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Confusion on "Dynamic Currency Conversion"

I am traveling to Ireland this coming May and plan on using my VISA card for many purchases.

But I am confused by earlier email thread in this forum which discussed Dynamic Currency Conversion.

Meaning the local hotel/B&B offers to charge you in Dollars instead of Euros.

I called Citibank and they indicated that there is 3% conversion charge to convert to US dollars.

But Citibank representative also told me that if I get the local establishment to charge me in Dollars instead of Euros then there is no 3% charge.

They do not charge just because it is a foreign transaction. They only charge the 3% if it needs to get converted from Euros to Dollars.

Does this make sense?

So now I am confused as to if I should try to negotiate with local B&B to charge in dollars instead.

Any comments?
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Old Mar 31st, 2008, 12:36 PM
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The problem is the B&B will likely use a ridiculous conversion rate when doing the conversion. That's the thing to watch out for.

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Old Mar 31st, 2008, 12:38 PM
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Right - the concern is that the B&B will likely use more than 3% for the "service" of the conversion. If you know the exchange rate for that day, and you know what the B&B will charge, and it will be less than 3%, then you'd come out ahead. But that hardly ever seems to happen, that DCC is a good deal, so I wouldn't expect it.
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Old Mar 31st, 2008, 01:02 PM
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I think you were misunderstood/misinformed by Citibank.

When a credit card transaction is processed, it is always in the local currency. If the local currency is Euros and you are offered a price in US Dollars, that amount is converted to Euros at the rate of their choice. It is then converted to dollars on your credit card statement.
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Old Mar 31st, 2008, 01:10 PM
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From Wikipedia on DCC.

"A Cardholder (say, from the United States) is traveling in Europe presents Visa/MasterCard for payment for a product priced in Euros. The credit card details are captured on the point of sale device (POS), which identifies that the card is a USA issued card. The cashier asks the cardholder to pay in US Dollars and the POS converts the Euro amount into US Dollars (based on a margined daily rate). The cardholder signs a receipt that shows the Euro amount, Rate of Exchange and the US Dollar amount. The service guarantees that this exact US Dollar amount will be debited to the cardholder account, and the exact Euro amount will be credited to the merchantís account.
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Old Mar 31st, 2008, 01:18 PM
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I don't know about Citi Bank, but it is VISA (and also MasterCard)that charges the 'Foreign Transaction Fee' of 1%. (AMEX charges 2%, BTW) THAT fee is passed on to you, by the BANK that issued your Credit Card. All the other 'Conversion and Foreign Transaction' fees are "ADD ONS" that are charged by and go to, the issuing bank.

The problem with DCC, is that the Establishment determines/sets the RATE and that they are required by LAW to OFFER you the CHOICE of which currency you are charged in. It usually says that, right above the signature line on the Credit Card slip!

You will be told that the machine does it Automatically, that the Dollar figure is just for reference purposes and or that they don't know HOW to charge you in Euros. The actual clerk may be telling you the truth -- AS FAR AS THEY KNOW ...

I know all this, yet I STILL usually get 'TAKEN' at least once, every year. Usually, it is because I am in a hurry and don't notice and sometimes, I just 'let it slide', because my vacation time is just to valuable to WASTE, just to avoid what works out to be only a dollar or so...

If you exercise REASONABLE prudence, particularly on MAJOR purchases (rental car, etc) and IF CITI BANK has told you true, then don't worry too much about it.

Bob
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Old Mar 31st, 2008, 01:21 PM
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Did you get your information from someone at a Citibank branch or from Citibank's international office? I ask because branch personnel do not always know what they are talking about when it comes to foreign transactions.

If you are certain that Citibank imposes the 3% surcharge only on transactions in foreign currencies, not on "foreign transactions" (those taking place outside the U.S. whether in rupees or euros or U.S. dollars), then you might not lose much by permitting merchants to use DCC. But if it is the latter, you would likely be paying upwards of 6% (the merchant's take plus Citibank's).

I would double check, searchng on the Citibank website to get it in writing, to be certain that the surcharg is only for "transactions in foreign currency" rather than just "foreign transaction" because the trend in banking has been to extract every possible dollar in fees.
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Old Mar 31st, 2008, 01:32 PM
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I don't think they were misinformed by Citibank, some cards don't charge a surcharge if it is already in USD by DCC. Some other cards do add on that 3 pct charge no matter what, for any foreign charge even when already in USD. That extra charge for a foreign transaction conversion is different from the conversion rate.

Chase charges 3 pct for any foreign charge, even when it has been charged in USD, for example. Citibank, by contrast, has terms that state their 3 pct charge is only for purchases "made in a foreign currency".

Chase Bank has a fee labeled "International Transaction fee" and that it is "3% of the U.S. dollar amount of the transaction, whether originally made in U.S. dollars or converted from a foreign currency."

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Old Mar 31st, 2008, 01:33 PM
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We end-run the entire issue by using cash except for the hotel bill (which we monitor like a hawk because the amount can get to two or three thousand dollars).

Using cash also eliminates the reconciliation chore when we get home.

Charles Schwab Investor Checking:

0% Currency Exchange Markup
0% International Service Assessment
$0 Foreign ATM Fee
$0 Annual card fee
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Old Mar 31st, 2008, 01:34 PM
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I found this on a Citibank web page under Terms and Conditions.

Fee for purchases made in a foreign currency:
3% of each purchase after it is converted into US dollars.
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Old Mar 31st, 2008, 01:58 PM
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A recent example: earlier this month in Italy I was presented with a credit card slip offering to let me pay in dollars, with the rate shown. While the rate I'd seen posted at banks for the past few days had been about 1.55, the rate shown on the slip was 1.61.
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Old Mar 31st, 2008, 03:35 PM
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DCC is quite common in Ireland (where it actually started by a company called FOREXCO in Killorglin, Co Kerry), but it's not universal. You can assume DCC in places frequented by foreign visitors, such as hotels, restaurants, gift shops and car rental desks, but it's rare in supermarkets and petrol stations. B&Bs vary - depending on proportion of overseas visitors. Staff are usually quite good about asking your permission to bill in your card's currency, or there are clear notices posted near cash desks and shop doors.
In Ireland, the average mark-up on exchange rate used in DCC is around 5%.
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Old Apr 1st, 2008, 02:14 AM
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Everyone wants a 'piece of the action.'
When I visit Ireland or any other European Country, I use my ATM card to withdraw 'coin of the realm' and pay Cash for everything: including B&B's or Hotels. My Credit Union ATM Card charges zero for Currency Conversion on top of the Standard 1% Foreign Currency Transaction fee.
By doing so, I get the best exchange rate available and avoid the 'Dynamic Currency Conversion' Scam, which most Hoteliers insist is for your convenience.
BTW
Many B&B Operators won't accept 'plastic' (i.e., Credit or Debit Cards)
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Old Apr 1st, 2008, 03:57 AM
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Hi there
I was in Ireland in 2002 and had planned to use my VISA at B&Bs also. I found many of the B&Bs didn't take credit cards. In addition, when I travel to Europe I usually use my ATM card to get currency. There is a charge for this but I don't like to carry a lot of cash. ATMs were not that prevelant in the little villages of Ireland. Just a heads up. Be sure to carry some extra Euros.

One last note, if you are staying at a working farm in Ireland find out if they work their sheep with dogs. It is an amazing sight to see. I had made arrangements in advance with a place that had this. My family thought I was crazy to make such a big deal of it. It was one of the highlights of the trip for all of us.

Have a great time. Ireland is beautiful.
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Old Apr 1st, 2008, 04:09 AM
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Be aware that I just received a notice from USAA which says that beginning in the near future, visa will be assessing the 1% fee on all foreign transaction including those done in foreign countries in USD and they will be passing that fee along...USAA is one of the good banks that doesn't add anything on top of the 1% although they do pass along the 1% so I wonder if this means Citibank and others which currently do not add 3% to DCC transactions will be doing the same thing?

I disagree vehemently about using cash when I travel...if a store takes credit cards, then credit cards it is..keeps me from having to run to the ATM all the time and is much neater and more efficient to use.

I have had the DCC scam pulled on me in Ireland with the usual lies noted above as well as Scotland and last June in Amsterdam...the clerk kept insisting she had no control over it...I insisted that I stand with her when she ran the transaction through the terminal and before the completion of the transaction came up the question, "Does customer wish to pay in US$?" I told her to press no and she was amazed (ha ha) that the charge came through simply in euro.

It is a scam, purely and simple and nobody shold allow themselves to be taken by it...the only ones I allow to convert currency are mastercard/visa not some establishment using a bloated transaction rate, nor will I be bullied into using cash...the only way to travel is with plastic..only in those extremely rare cases where a merchant doesn't take plastic will I use cash no matter how small the transaction down to €1.

Incidentally on a related topic about credit card usage in Europe, be aware that the 2 very important consumer protection regulations of mastercard/visa do not apply in most European countries. Currently the merchant's agreement with the credit card companies prohibit merchants from setting a minimum for use of a credit card or imposing a surcharge for use of a credit card although they are allowed to offer cash discounts (somehow the distinction eludes me)...these protections to consumers are not available, unfortunately in Europe.
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Old Apr 1st, 2008, 04:12 AM
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Actually, the whole DCC thing was started by CAR RENTAL firms such as Hertz and they do it all over the place in Europe when they can get away with it..such as if you agree to purchase THEIR insurance there is this little small print piece at the bottom of the agreement saying you agree to be charged in your "home currency" rather than in the local one.
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Old Apr 1st, 2008, 05:07 AM
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Just cross out the offending line in your car rental agreement and countersign it. Then insist, when they put your card through, to charge you in local currency.
While car rental firms may have been the first to introduce DCC, the actual mechanism of it - instant currency conversion at the point of sale - was pioneered by FEXCO in Ireland and now has spread to most card handling services. Barclays Bank in UK, for example, having seen their profit drop by DCC when their customers use their cards abroad, now actively encourage their retail business customers to use their DCC service when non-UK card is presented.
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Old Apr 1st, 2008, 05:19 AM
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Actually from my readings of this particular scam, and repeat it is a scam, it began long before the existance of POS terminals in Ireland...what many Irish merchants did is open up 2 separate credit card accounts, one with their local bank for all transactions and one with a US bank for transactions on American cards...they manually did a calculation based on the rate and asked the customer if he or she wished to pay in Irish punt or US$ and ran the charge through the appropriate machine and made 2 separate deposits one to their local bank and the other to the US bank...

In more recent years, as noted, car rental companies and then merchants began to have the ability through pos terminals of having all this done automatically where they would get a piece of the action as well as the credit card processor...now the mc/visa banks are hitting back..as noted above visa recently announced it would extend the 1% fee to all transactions using a "foreign" (out of that country) credit card and I have no doubt that some of the banks which have not already passed along fees as a foreign transaction fee (rather than a foreign conversion fee) will begin doing the same.

Luckily, the only times it has been tried on me have occurred in English speaking countries (including Holland where almost everybody speaks English) and I was able to make it clear that I would not accept being ripped off, after the usual lies indicated above...it hasn't been pulled on me yet in Germans (perhaps Germans are too honorable to do that), Italy (although it's prevelent there) and Spain where I'm visiting next...if they try to pull this garbage on me, I'm sure I will get the no hable ingles garbage and if worse comes to worse, I intend to cross out the statement that I accept the currency conversion as well as the US$ amount, circle the euro amount and write local currench not offered and dispute the charge when I get home.

No sucker am I.
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Old Apr 1st, 2008, 05:24 AM
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Hi B,

>Citibank... indicated that there is 3% conversion charge to convert to US dollars.

If you get a CapitalOne card, they don't charge anything above the 1% to the Visa/MC people, which you have to pay anyway.

You do NOT want DCC.

Your local B&B will add about 6% to the interbank rate to do you the favor of billing in USD.

Cheapest way to pay a B&B is to get cash from the ATM.

Some of them will give you a discount for cash.

Enjoy your visit.

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Old Apr 1st, 2008, 06:04 AM
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...1% to the Visa/MC people which you have to pay anyway.

Schwab Investor Checking: charge rebated to cardholder.
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