What Is Dynamic Currency Conversion (DCC)?

Dynamic currency conversion is pretty simple: when you’re about to pay by card, the terminal detects that your credit card and the local currency are different, and then prompts you to switch to your home currency. For example, if you’re back home and use a U.S. card, the terminal may ask whether you want to be charged in RMB.

The benefit of this service is that, at the time of payment, you can directly see the exchange rate in your home currency and know exactly how much you’ll pay.

Here’s what a receipt with DCC looks like (from Wikipedia):

Why Don’t We Recommend Dynamic Currency Conversion (DCC)?

This service sounds great, so why don’t we recommend it?

Important things, said three times:

The exchange rate is set by the merchant!
The exchange rate is set by the merchant!
The exchange rate is set by the merchant!

This is why dynamic currency conversion (DCC) is such a trap. In general, merchants add an extra 0.5%~1% fee into the rate. On top of that, DCC itself also carries a fee of about 3%, which brings the total cost after DCC conversion to nearly 4%.

For example, suppose you’re traveling to a country and expect to spend US$2,000.
If all of your purchases go through DCC, you’d pay an extra 2000 x 4% = US$80 in DCC fees. That’s no small amount.

Are There Any Exceptions Where DCC Is Worth Using?

Yes, but the chances are tiny. One blog described a case where DCC saved money (link). The basic situation was that the writer used cash+points to book a Hyatt hotel in Chile. Under local law, paying in Chilean pesos meant paying an extra 18% tax, but paying in U.S. dollars did not require that additional tax. So this was one example where using DCC actually saved money.

How Can You Avoid DCC?

  • Discover or American Express do not offer DCC, so if you pay with Discover or American Express, you won’t get DCC.
  • If the terminal or merchant asks which currency you want to be charged in, be sure to choose the local currency.
  • Check your receipt to see whether you were charged any DCC-related fees. If you were, ask the merchant to cancel the transaction. If the merchant charged DCC fees without your consent, you can dispute the transaction.

Can DCC Help You Avoid Foreign Transaction Fees (FTF)?

No. DCC does not help you avoid foreign transaction fees (FTF, or foreign transaction fee). As long as the merchant is overseas, your bank can still charge you an FTF. The reason is simple: FTF depends not on what currency you used, but on whether the transaction took place overseas (outside the U.S.).