Credit card charges in dollars rather than euros (in Europe) -- please refresh my memory....
 

I saw some old threads on this, but I don't know how I can find them now, and actually, some charges were put on my card directly in dollars when I was in Spain last week.

When I questioned one merchant, the response was that there was nothing they could do. Somehow the machine did the conversion.

I assume that the exchange rate was unfavorable.

Could people please refresh my memory regarding this topic?

Thanks.

Not sure how that happened. I was just in Italy 3 weeks ago, bought everything in euros on my Visa and MC cards. When I received my statements, the price in euros was listed as well as the actual cost converted into USD. The exchange rate given is the current one going now and I think it is fair (1.23 USD=1 euro) and I was not over-charged in any way.

I've never had the problem prior, but I remember reading about this problem here. If I recall correctly, it happens in the UK (Scotland?) as well.

Some of my Spain charge slips stated the amount in Euros and went on to quote the amount in dollars. There was also a note indicating that when I signed, I accepted the implicit conversion rate. (Smart move on their part, of course.)

Since I was on a trip, I didn't want to burden myself with these trifles, but I do want to find out about this practice before my next trip. I'm especially interested in knowing if the merchant has any control over it.

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Dynamic Currency Conversion

Thanks -- I looked at a couple of threads.

So fair to assume that

1. I *do* have a choice?
2. I should always insist on being charged in the local currency?

I did notice a post from Patrick that there were direct charges in his case in dollars that were at a favorable exchange rate though.

Thanks.

There were a couple threads about it -- seemed to be mainly in Ireland. As I recall, it was never mandatory, just some merchants did it unless you really kept an eye on them, or offered it to the unknowing.

I was in Spain last March/April, not that long ago, and none of my credit card charges (in Andalusia and Madrid and Segovia) were ever in USD. How did you question the merchant -- I gather you knew they were going to do this ahead of time? (it sounds like you didn't know until you got the statement, but you say you asked the merchant, so I wondered). Did you ask them what the exchange rate was when they did that?

I saw the slip they gave me, and I saw the dollar amount with an implicit rate. Then I asked about it (but not forcefully) and the response was that the machine did it. So I didn't make a fuss. At the back of my mind I was concerned that they could be crediting my card with an amount that wasn't equivalent to the dollar amount they charged if they voided the whole thing. Call it paranoia, but since I didn't understand the problem completely, I just told myself I'll investigate when I came back.

It happened at least twice. Once, I remember for sure, was in our hotel in Seville.

So, would it be fair to assume that if this happens again, I should insist that I want my card charged in Euros?

It happened to me in Ireland, but not during my recent trip to Italy.

The machine won't do the conversion unless the merchant programs it to do the conversion.

I think this is a new scam that needs to be reported. It probably cost you an additional 3% -- ergo, you probably paid for the merchant's cost for using VISA & M/C for that transaction.

Happen to anybody else traveling recently in Spain? ((b))

Hi 111,

It would be better for you to have all of your bills charged in euro.

Not all merchants will give you the bank rate.

Originally, it was a scam that started mostly in Ireland in tourist type shoppes. The merchant would open up an account with the local bank and through a subsidiary with a US based bank. The customer would be told, "for your convenience we will write the charge up in your currency (usually USD). If you objected, they would try to con you with, "we are saving you the 3% charged by credit card companies. Look at the exchange rate, and show you it was lower than the cash rate posted at banks. So you thought you were having a favour done for you....not realizing the cash rate at banks is 8 to 9% above the interbank rate and even with the near criminal (see my intellectual discussion with the bank guy Ryan) fee of the extra 2% by some (but by no means all cc banks) you still did much better by having the charge written up in local currency, in this case euro.

Now banks want in on the lucrative fee setting of foreign conversions on cc's and see the foreign cc's don't get the fees. So what they do now is this new thing called dynamic currency conversion. In it, when the merchant swipes the card, the card is immediately recognized to be a card from a US bank in USD. So the credit card machine does a quick calculation at some rate 4 or 5% above interbank and you are given the option of paying in USD or in local currency. Emphasize you do have the choice. The charge then clears through the system on the merchant's side in local currency and through the mc/visa system as a USD charge. The bank on your end has no opportunity to add the near criminal (sorry Ryan) extra 2% charge above the 1% interbank charge mc/visa charges. The local bank and the merchant splits the difference.

It is spreading worldwide, no longer confined to Ireland. As the op indicated, it was done in Spain. Many hotel, car rental terminals now do dynamic currency conversion. Even in the US, there are card terminals that do this i.e. the card is recognized say as a card from the UK and the customer is given the exact exchange rate in sterling while on the merchant side it is a charge in USD.

The advice, of course, is you never do as well with dynamic currency conversion as you do by using a credit card not issued by the near criminal banks in the US and to have the charge written up in local currency despite what the merchant tries to tell you.

Thanks xyz. That's my impression of what happened as well -- that the machine knows that my card is a US card.

Now, the thing is that I wasn't offered the option of paying in Euros or in dollars. I assume that there's a manual setting that the merchant can use to insist that the charge be in Euros?

It is NOT always a scam any more. I ran into the "scam" in Ireland a couple times, and yes, it costs you money!

But then in London a restaurant charged me in US dollars insisting it was a favorable rate. I didn't argue because it wasn't a big amount, but I was sure they were wrong. When I checked it was indeed a good rate-- in fact so favorable that I saved the usual 3% conversion rate (from my Citibank Aadvantage) since it was already in dollars. And yes it was equal to a bank rate -- 3 percent lower than all my other charges within a day or two that had to be converted. I'm not sure how they do this, but it did indeed work.

Just for information, one place this happened was at Rock and Sole Place.

I feel like I need some hand holding here. Someone please write a quick step-by-step primer regarding what we should all do. :-)

The problem is unless you have a calculator that does foreign currency, (another function my mobile phone does for me) you never really know while if the charge is written up in local currency you know you will pay interbank + 1% (or 3% if you use the near criminal banks)....

I agree in principle, xyz. But I guess it does help to do a quick mental calculation to see if the implied rate is reasonable -- and I think that the rate may even be stated on some of the charge slips. So, for example, if the rate is 1.27, say, you know for sure that's not reasonable, as the Euro exchange rate hasn't been this high (well, I could be wrong).

So I'm still interested in knowing how much control I've over this. If the machine does the dynamic conversion and the rate offered to me is 1.27 and I don't like this rate, can I tell the merchant that I want the charge be in Euros? What if the merchant responds with a line like "the machine does this"?

You always have the right to insist the charge be written up in local currency as far as I am concerned; I am not a lawyer but technically use of foreign currency is not really legal tender in many countries but nobody really objects.

Now I don't know if this is the same thing but many years ago in the Caribean I went into a restaurant after having looked at a menu in local currency. When the time came to pay, I was shown a much higher rate in USD. I told the waiter to bring it back and write up the charge in local currency. He said it was impossible, it can't be done. By law, he said, Americans must pay in country X in USD. I said he was crazy and insisted on seeing the manager. After a semi friendly argument, he told me as a courtesy he would have the charge written up in local currency and thus I saved 30% or something like that.

As I understand it, you can always insist the charge be written in local currency and in general this is the best way to do it (although Patrick has come up with an exception).

Very interesting. Ok, I'm ready for the next trip, sort of. :-)

111op... you manage to get around nicely! I am envious!

Thanks, Suzie. When I e-mailed my friends about the recent trip, one of them wrote back and said, "It sounds quite fun, with your usual chaos tossed in!"

That cracked me up -- with me, there's always some sort of chaos. :-)

Anyway, I'm sure that you've your own travel adventures. It's just that the grass is always greener, etc.

At Harrods this spring they offered the choice of charging in pounds or dollars and said what the exchange rate was if I went with dollars. There was no grief when I turned them down.

You have a right to have the charge made in the currency that the item is being offered for sale.

This would be the same as going to a store in your own community and the store charge in a foreign currency.

Keith

Out of curiosity, what did you think of the Harrods's rate? Did it seem good?

I had read about this issue here before my trip to Italy last summer so I was kind of watching for it. It did happen a few times. Each time I told them I wanted the charge in Euros not dollars and they said there was nothing they could do about it, that the machine recognized American cards and made the conversion. Three different clerks told me they had noticed it happening when they got new credit card machines. The rate was not favorable but wasn't horrible either. At the time the exchange rate was about 1.22 or 1.24 and the rate they charged was 1.27. So since they were small charges I just let it go. Would of course be a bigger deal for large charges like hotel rooms or car rentals.

I get the impression this is something we are going to see more of in the future. I hope I am wrong but that's how it looks. I find it hard to believe that three or flour different clerks in small stores would all lie about being able to flip a switch or whatever to charge in the desired currency, especially when specifically asked.

I believe they are wrong...as I understand the system you do have the right to ask the charge be written up in local currency and I am sure there is a button they could push to write the charge up in local currency...I, being petty and hostile of course, would have screamed bloody murder. You being nice just paid and walked away.

Oh well!

This happened to me some years ago while I was in Brazil. I was at H.Stern and they insisted on charging my card in US Dollars. I insisted they charge my card in Reales and we went back and forth. In the mean time I noticed several other non American tourists had their sales rung up.....with Reales.
I ended up not buying from them. I got home and called Mastercard International and was advised they should have the capability to transact in their local currency. I imagined that it was a ploy for them to get a more favorable exchange rate because of the dollar at that time. I am not sure though...

This happened to us, just 2 weeks ago, at a "Rick Steves" hotel, in Varenna, Italy. the Hotel Eremo Gaudio, presented a charge ticket, in USD and euros. When the bill came through, the rate of "exchange" by the hotel, was at 1.27--the highest rate we paid! We really didn't examine the bill closely enough--our mistake.

It may be a good idea to call the credit card company to ask, I guess. I should probably do this. I mean, it is potentially possible that a clerk really doesn't know how to work a machine or change its default settings. So it'll be interesting to see if a dollar amount can subsequently be reversed for a euro amount (I doubt it though).

111op, Harrods's rate wasn't outragous. Better than a Bureau de Change, but not as good as using an ATM or charging the card in pounds.

Keith

Thanks. The exchange outlets are usually pretty horrible though -- first the rate isn't good, and they typically tag on a service charge too. Pretty scary.

Where can I read xyz's discussion with Ryan about banks?

Alfmoody

If you click on xyz's name you will get a list of the threads to which he/she has posted. I believe the discussion in question is on a thread entitled Continental Mastercard or something like that. I tried to copy the URL for you but something screwed up.

Regarding the claim by a hotel that machines 'recognize' American cards and automatically do conversion -- if so, surely this is because the hotel or business in question programmed the machine to do so, which hardly renders them blameless.

Sue...

The who principle of this new system of dynamic currency conversion is that the cc machines recognize what country the presented cc is denominated in.

You could be in a euro country and present a UK credit card, the machine will recognize (if the company has subscribed to the dynamic currency conversion system) that a UK credit card has been presented and suggest a price in sterling, if an Australian card is presented it will suggest a price in Australian dollars etc.

alfmoody...

Ryan claims to be involved with a bank and is speaking of a bank perspective which I am sure is true.

He doesn't like me calling the behaviour of banks in the US that add an additional 2% to already converted charges near criminal. He goes on to admit that banks do not provide any service for this charge since the charges are converted by the visa/mc system which assume all the risks inherent in foreign currency transactions. When the charge reaches the US bank, it has already been converted and it doesn't matter whether the charge was originated in New York, London, or Timbuctoo.

Having said that, he says the charge is not near criminal as the charges are explained to people (in the 20 page fine print of the customer agreement with the bank), and that the banks have a right to charge for anything they damn well please as they have to cover costs that they don't charge for such as fraud, high risk customers etc. Lying to customers that they are charging 2% to cover foreign currency exchange to him is not near criminal

Oh well, sometimes people can't see the forest through the trees.

I'm not sure if a proprietor necessarily knows what his/her machine is doing. Basically, who pockets the 3% (or x%), if the rate is unfavorable? The proprietor? Or the bank/entity that provides the machines to the business? Or do they split the profits?

I can definitely accept the fact that machines are able to do the dynamic conversion. It's what happens afterwards that's a little more unclear to me.

I missed the discussion between you and Ryan the first time. In reading a summary of it, I guess he has a point that the charges are not necessarily criminal. I do find the practice dishonest. That's why I've switched to MBNA when I travel.

There're lots of similar dishonest business practices, I find. I find that unless I contact my bank to ask about the best money market rates, they're never given to me. I need to call my phone companies to figure out what the best rates are, etc.

I just have a distaste of these businesses in general. But they're doing is perhaps not criminal, but there's a lot of withholding of information. These businesses are not going to be forthright in terms of telling their customers what may be best for them.

As I understand it from my reading (and I don't work for a bank but I read up on this stuff a lot)...

Under the old system, a merchant opened up cc accounts with his or her home country bank (let's say Ireland) and then through a subsidiary opened up a cc account with a US bank say Bank of America. The charge was deposited in the appropriate account and the merchant pocked the inflated exchange rate that was used in the exchange; as much as 6 or 7%...

Under this new systen, the purpose is to keep the currency conversion out of the visa/mc system. It allows the dynamic currency conversion financial institution to pocket the difference between the interbank rate and the rate used to dynamically convert the amount. It then splits the difference with the merchant and this is the part that is fuzzy the converted amount enters the international cc system already converted.

Say something costs £10 and the interbank exchange rate is $1.80. Under normal cc rules, the merchant would enter a £10 charge, get his £10 (minus the discount rate but let's leave that out of the discussion for simplicity sake) and the charge when entering the international cc system would convert to $18.18 ($18 using the interbank rate and the 1% charge or $.18). The charge reaches the US bank as $18.18 and if it is a well behaved bank such as MBNA, it remains $18.18 or in the case of the near criminal banks an additional 2% is now added to the charge which would be $.36 and the charge now comes into your account at $18.54..(some banks even have the gall to compound the 2% - Chase is one - and applies the 2% to the already converted rate!). Visa/mc pockets $.18, the home bank pockets $.54. Back in England, the merchant's bank pockets nothing, it simply played with the original £10.

Now here comes dynamic currency conversion. They might use a rate of internet + 5% so on the merchant's terminal, the charge comes up at $18.90. You complete the transaction, the merchant deposits it. His account with the cc provider is credited for £10, it then is sent through the international cc system entering it on the us side as a charge for $18.90. The provider of the cc has just pocketed $.90 and then rebates part of it back to the merchant...the merchant wins, the provider of the cc wins, your bank might win if you pay interest (although they don't get the additional 2%), the only one who loses is you.

Of course I know what everybody is thinking who has had the patience to read through this entire long winded thread. Who cares about 90 cents...well what if the charge was £100? or £1,000 and what if 1,000 such transactions take place at a merchant each week or month or whatever.

On your side, perhaps no big deal. On the merchant's side, a nice profit. On the dynamic currency converter's side a nice profit....

I think this is the way it works...

I guess it makes sense the merchant gets a rebate -- I mean, why bother using a new machine that does the dynamic conversion otherwise? Economically, it makes sense that there should be an incentive for the merchant.

So if that's the case, persumably the merchant should have a manual setting that will turn the conversion off. I'll have to call my credit card company and ask, as I keep saying.

I think that saving 2% or x% is something. I mean, it requires hardly any work on my part. Why leave money on the table? That's why I've stopped using my Citibank Visa/MC -- I think that they charge something beyond the 2% (4%?) -- even though all my accounts are linked with them. I used to pay my cc bills by transferring funds online.

xyz123

That, then, is truly astounding; as you say, it has significant implications in the aggregate if not in the individual case. This strikes me as inflationary in the extreme - or is this a naive notion? What have various official gurus (e.g. Federal Reserve chairman) had to say about this, if anything?

I still think the merchant is not altogether innocent - after all, he might well have actively sought to be part of such a program. Furthermore, the consumer ought to at least have the right to know the details in advance of purchase, so as to make an informed decision possible.

Sue...

Do remember one thing about the system...it is supposed to be voluntary. In all the advertising to merchants about dynamic currency conversion I have read on the web, customers are supposed to have their choice to have the charges written up in local currency despite what the clerks said to a poster on this thread.

And you will find some very naive people, the same people who don't mind the 2% rip off by the near criminal credit card banks, who utters such moronic things as, "so what if it costs me another 3% for my holiday. I'm spending $3,000 anyway. What's another $90?" Or "I'd rather know exactly what it is costing me than to receive a surprise when I get the credit card statement."

According to this URL, transaction processing machines that are capable of suggesting a currency conversion are indeed being marketed worldwide. The machine suggests a conversion rate based either on an automatic read of the nationality of the card, or by requesting it from the merchant to input same.

However, as I suspected, the machines do NOT automatically apply the conversion rate, or in other words, they do NOT automatically convert the currency. They do so ONLY after the merchant confirms it by pressing a programmed key (in this case, ENTER) - and presumably only after first asking their customer if they wish to participate in Dynamic Currency Conversion (DCC).

http://www.planetpayment.com/CurrConv_mer.cfm

This URL makes clear that DCC increases the bottom line for the merchant, over and above any method formerly used by the merchant.