Dynamic Currency Conversion--what's the big deal?
 

Before my trip to Ireland I read all the messages on this forum and knew that I should decline DCC and pay in euros whenever possible. As anyone who has ever been to Ireland can attest, this is easier said than done. If you're not paying attention, they will show you the bill in Euros and only when you review your receipt you signed does it show you paid in dollars. So I was feeling like a chump quite a few times. Come home and review my bill and see the DCC made it six of one, half dozen of another. In some cases, the rate they quoted (1.39 dollars to the euro) was the same as my bank rate, so it would actually have benefitted me to use it, as there was no foreign transaction charge. In other cases the rate was worse, 1.42 dollars to the euro, but still, if your transaction fee is 3%, as it is for many cards, then it would still be a wash. Am I missing something?

LOL...stand by, I am certain you'll get an ear full.

HI MR,

>In some cases, the rate they quoted ... was the same as my bank rate.

Just because your bank is robbing you doesn't make DCC good.

$1.39/E is at least a 4% markup.

What dates were you in Ireland?

CapitalOne doesn't charge a conversion fee.

((I))

We just got back. USAA is the bank, in every other way they are generous so I doubt they were "gouging" me.

Monica..

The rate changes daily...perhaps when you did the dcc transactions the euro/usd rate was lower than when you did the straight transactions.

USAA charges a 1% msrk up...if you give me the dates of the transactions, I can come up with what the exchange rate should have been....during the past couple of weeks, the rate had sunk to $1.33 and right now is about $1.36 so $1.39 is indeed a rip off rate and while you are lucky using USAA, there are many other banks that add on the 3% anyway even if you fall for the dcc scam.

You can find out exactly what the markup on a transaction was at xe.com/ccc

It may not be so bad if you really only had a 3-4% markup total and are used to that with your card. However, some credit cards still charge you their foreign conversion fee on top of the DCC markup (I know because I've gotten CC card soliciations in the mail recently, and saw them say that in the term).

You need to look up the actual exchange rate on the day of the transaction. For instance in the last week the € dipped about 3 cents and then went back up again. So just looking at the numbers w/o also looking at the dates really doesn't tell you anything useful.

It's not the size of the mark-up, it's the dishonesty and lack of consideration dressed up as "for your convenience", when it clearly isn't.

There's is nothing "dishonest" about telling someone that you are going to charge their credit card in their "home" currency and that you are going to charge whatever rate you feel like.

The second part (whatever rate we want) is usually left out in these conversations.

Isn't DCC when the price is in Euros, but they write it up in dollars (at whatever rate they choose)?

It is my understanding that the merchant's actual credit card transaction is ALWAYS in the local currency.

That's true - the local currency value stays the same. But in addition they get a cut of the profit their card handler makes in conversion (maybe 50% of the 3-4% mark-up).
So it's in the merchant's interest for customers to opt for DCC.

DCC automatically converts the local currency to that of the credit card issuer -- no work at all for the merchant to earn a small percentage on each such transaction. Many US card issuers define "foreign tansaction" as one occurring outside the US, regardless of which currency appears on the bill, so it's possible a tourist would pay a combined 5-6% for the charge.

I'm not sure how it works, but I don't think the actual credit card transaction can be in the local currency as they tell you the exact amount it will be in your currency (USD or whatever, I suppose it works for other countries). They wouldn't know what the actual amount would be if they left it up to your card to determine the transaction rate.

hmm.. I see some other posts now. Well, I've never had it and would reject it, but from things I've read on it, it is not just a matter of the charge being in the local currency and them taking a cut of Visa or Mastercard's 3 pct markup. Let's say they have some machine that tells them the exact conversion rate that will be used and so they can tell you the exact amount -- I've still seen posts on Fodors where the end result was more than the 3 pct markup, so I don't think they only mark up the rate the std 3 pct, it can be other rates.

What would be the possible advantage for any card like Visa or MC to allow them to do that, take out part of the profit?

<<< so I don't think they only mark up the rate the std 3 pct>>>

That's the CARD Companies markup - not the trader offering DCC

The DCC is something on top of what you are already paying.

I have several CCs. Depending on which card I use and whether I fall for the DCC, my CC bill will be different.

Case 1: card #1, best case, no DCC

1% - charged by MC, unavoidable
0% - no bank foreign transaction fee
0% - I was awake and caught DCC
----
1% - total

For $100 equivalent purchase, my cost was ~$101.

Case 2: card #2, worst case, DCC

1% - charged by MC, unavoidable
3% - bank foreign trans fee, whether DCC or not
4% - I was tired, did not catch DCC
----
8% - total

For $100 equivalent purchase, my cost was ~$108.

DCC can make a big difference depending on what % your CC charges; how much the merchant inflates the exchange rate; and how much the original bill was.

As an example, awhile ago we went for an expensive dinner....about $120 Euros....in Italy and the exchange rate for that day according to my Mastercard was $1.28 to the Euro. The merchant billed my CC in dollars at the exchange rate of about $1.37 to the Euro. That makes a big difference.

BTW, my Mastercard has "only" a 1% fee.

So you have to consider all the factors.

I insisted that the merchant charge me in Euros...which he wasn't too happy about. The DCC adds to his profit when he can determine the exchange rate.

OOOPs....I meant 120 Euros.