Dynamic Currency Conversion
 

I've never come across this racket in my travels: Is the conversion made only from euros to US dollars, or are other currencies involved?

It is a growing problem...

The credit card processors get merchants to buy into the scam and it can be in any country...so in the UK it can be in sterling...in Switzerland in Swiss Francs....in euroland in euro yada yada yada...

It works like this...the merchant runs your credit card through the terminal and based on the number the data base figures out what country the card was issued in and suggests to the merchant based on an excessively high exchange rate what the charge would be in the currency of the card so if you are Australian running into a merchant in the UK pulling this garbage, the conversion would be from sterling to AUD. Some merchants in the USA are being pressured by the credit card processors to buy into this rip off also.

The scam part ocmes in when the merchant's terminal suggests the amount the charge would be in the cardholder's currency and asks the merchant to confirm the customers wants to be ripped off oops wishes to accept the conversion. This is where the scam comes in; the merchant is supposed to ask the customer if they want the pleasure of being hosed but most don't and pressure you to sign the credit card charge and not recognize what you are signing (a statement you were offered the opportunity to pay in local currency but opt to accept the conversion (at the rip off rate) and your acceptance is final.

If you notice what you are signing, they will lie through their teeth with such statements as your currency rate is being shown as an approximation, that the terminal does it automatically, that they are required to charge in your currency that it is too late yada yada yada.

It is most prevelent in the Republic of Ireland but the cancer has spread to countries such as Spain, Scotland, England, Italy mostly. I have rarely encountered this in France, Scandanavia, Germany....as I said some US merchants now do it on foreign visitos to the US.

xyz123: Thanks for the info: A few more questions, however. Pardon the naivete.
1* Given that the exchange rate is exorbitant, who benefits, the merchant or the card supplier?
2* Why would a merchant in the UK, for example, want to be paid in AUD? Wouldn't the merchant have to pay a commission to have the AUD converted to Sterling?
3* If the total on the slip predented for signing is in Euros, does that mean that no currency conversion has occurred?
4* Despite any concern of the merchant, I assume that one can insist that the bill be presented in Euros? (I don't mind aggravation: When necessary, I'm good at aggravation.)

You miss the point...the merchant is paid in his currency and the billing is done in the cardholder's currency...

It is a question of who does the conversion....normally if I buy something for €10 in Ireland, I sign a slip that says €10, the merchant deposits the sales slip with his or her credit card processor, the merchant gets his or her €10 (minus the processing fee which is the profit to his or her cc processor) and is out of the picture and done with it.

That charge then entes the international visa or mc processing system and at that point is converted to my currency say USD...the visa/mc processing uses the interbank rate which is the lowest rate possible and adds a 1% surcharge...since the exchange rate for the euro is now about $1.25 we'll use that figure...so the €10 is converted to $12.63 ($1.25 + 1%) and is now presented to my bank as a charge of $12.63...my bank may leave it as is or add an additional fee...many banks add a fee of 2% now so the total additional fee above the interbank rate would be 3% making the final charge $12.88 which would appear on my cc statement.....(actually given a lost law suit, it might appear as $12.50 and later on a foreign fee of $0.38....visa/mc makes 1% for the conversion and my local bank either just passes along the 1% or makes an additional 2%...well that's the way it's supposed to work.

A few years ago, some Irish retailers decided they wanted in on the profits of currency conversion so they initiated this scam which is now controlled by the cc processor. Same €10 charge...it is converted by the terminal to a USD amount (if your card's currency is USD) using whatever rate they want...they may decide on 5% so the sales slip will now say besides €10, $13.13....and they pressure you to sign it with the lies noted above...now it enters the processing sytem and the processing system pays them their €10 plus a piece of the 5% fee (that is where the merchant makes his or her money on the scam)...through the use of 21st century technology the charge now entes the visa/mc system not in Ireland but in the US at the inflated price of $13.13...but to make matters worse, mc now imposes a 0.8% fee on this for their lost income and many banks still put an addition foreign fee on the charge making it 3% anyway on the inflated rate.

The whole thing sucks...even the additional 2% fee on the original charge is nearly criminal as the banks do not have any currency fluctuation problems to worry about, they do not actually convert the currency and then to charge a conversion fee on something already converted, well that is even more nearly criminal but they get away with it because they're banks and government agencies are afraid to try to protect people against banks.

So everybody wins but the customer when dcc is used...but you should read some of the garbage being told to merchants to pressure them to sign up for this...how they are performing a service for their customers as they will know up front what they are paying (so what if they're paying more they'll be ecstatic knowing the exact amount of the charge as if calculators don't exist), they get a piece of the action as well as the cc processor and the banks have made sure they don't lose out on their fee income.

Again, it's simple...if you say two amounts on a charge slip, they are performing this scam on you. Just say no I refuse to sign and insist it be done in local currency....by visa/mc regulations they are required to do so no matter how much they lie...if they refuse simply cross out the disclaimer that you accept the amount as final and write dcc declined and when you get home, dispute the charge.

1. Both. The merchant share in the profit from conversion with the card handler.
2. They do not. They get paid the full amount in sterling (plus a few % of conversion profit), while the card handler does the conversion (pocketing profit) and presents the converted amount in Aus$ to Visa/Master.
3. In Euro countries, generally yes. But the presentation of card slip can be clearer - sometimes the smounts in local currency and converted amount (through DCC) are equally prominent.
4. Yes, but as you say you can expect trouble. Sometimes the shop staff aren't even aware what DCC is amd don't know (or claim to know) how to override DCC. Usually by speaking to the manager or supervisor, they will know which button to press to bypass DCC, or to void the transaction and resubmit it without DCC. If they still don't budge, offer to pay in local currency cash or write on the slip 'Local Currency Not Offered', and take it up with your card issuer on your return.
I routinely say when handing over my card abroad that I want to be charged in local currency (euro, CHF, $ or whatever).

more on the subject:
http://www.fodors.com/forums/threads...p;tid=34816484

You know, I did a lot of research before our trip to Italy and I had really never heard of dymanic currency conversion until right after I RETURNED from Italy. As it turns out, the only time we were given the "opportunity" to pay in dollars vs. euro was on our last day and it was the highest credit card charge of the trip by far, for three nights at our hotel in Venice.

When I was given the option, I asked the exchange rate-they said 1.30; I knew the rate had been betweeen 1.28 and 1.30 during our trip, so I agreed to it, hoping it would save me the credit card "adjustment" fee. As we were leaving the country, we had no other euro charges that day, but the exhange rate on charges made the day before had been a little under 1.29. The amount appeared on my credit card statement in dollars, but with no (visible) conversion fee. So I converted at 1.30. That was around $15 more than if I had paid at 1.29. But a 3% conversion fee would have been around $28.

I'll trust the wisdom on this board and never agree to dynamic conversion again, but I don't have the feeling I was ripped off.

It's also now happening with ATMs, but at least you get a choice. When using ATMs on a recent trip to Madrid, we were sometimes asked if we wanted to be charged in Euros or GBP. I think those particular ATMs belonged to bureaux de change rather than banks, so I'd imagine they'd be taking a heftier rake-off.

This happened to me in a very nice restaurant in Venice last year. I told the waiter I wanted to be billed in Euros. But he told me that there was no way to avoid the "automatic" conversion to dollars by their credit card terminal.

I told him I would refuse to sign the receipt or that I would sign "under protest" if the bill was in US dollars.

I asked to see the manager who told me I was the very first person who objected to this conversion. He told me all the other Americans "really appreciated" this automatic conversion.

When I refused to sign the slip, he figured out a way to put through the charge in Euros. After that confrontation, the waiter and the manager were no longer very "cordial" to us.

The mood for the remainder of our evening was somewhat dampened. Too bad, because it was a really lovely dinner in a very nice restaurant.

After that experience, we just made sure we had enough money from the ATM to pay for meals in cash in order to avoid any more ugly incidents.