Using your credit card internationally is a convenient way to pay for things. Less risky than cash, credit cards also offer a lot of protections. Sometimes, though, paying with credit cards while traveling can turn into an expensive proposition. Unexpected fees, unknown conversion rates, and other costs creep onto your statement.
Even with credit card companies that profess not to charge any fees for international use, you never know if the exchange rate will be favorable. It is no surprise, then, that a popular – and legitimate – scam that purports to provide travelers with the convenience and security of locking in their exchange rate at the time of purpose, is becoming more common.
This practice, known as Dynamic Currency Conversions (DCC), catches many people unaware but in every circumstance, you end up with a poor deal. Here’s how DCC works:
When paying with a credit card overseas, the merchant may offer to charge you in your home currency, so you have the “peace of mind” of knowing what the conversion will be. More often than not, this DCC is not offered, but the staff instead use it as the default option. The charge slip will show your sale price in local currency and, below that, in your home currency. A disclaimer will say something like:
[ ]I accept that the selected transaction currency is USD and is final and acknowledge that I had a choice to pay in THB. I accept the conversion rate and final amount and the currency conversion is conducted by merchant and is not associated with or endorsed by Visa.
You may think that if you want to pay in the local currency, all you need to do is leave the box unchecked and then sign the charge slip. Of course, the staff will simply check the box afterwards and you will be charged the DCC.
Who does this? Here in Thailand, I’ve noticed that credit card machines powered by Bangkok Bank seem to be the most frequent ones pushing the DCC. Boots, a British-based personal goods chain, is a regular offender. I’ve also received reports from friends of King Power, the company that has a monopoly on duty-free goods at Bangkok’s two airports, does this, too. I’m sure these two companies are hardly alone.
The impact of DCC on your bank account is significant. A recent charge of THB 5,295.75 was “conveniently” converted for me to USD 180.06. I declined the conversion and insisted on being charged in Thai Baht. The charge that hit my credit card statement was only USD 173.00. The DCC represented a 4.1% charge over what my Visa credit card issued by Chase Bank charged me.
Travelers abroad, permanent expats as well as tourists, need to be vigilant for Dynamic Currency Conversions. If you are presented with a charge slip that has your home currency, or any other non-local currency, listed, refuse to sign the slip. Insist that the charge be refunded and that another charge slip be prepared in the local currency.
As Visa notes on their website, “If you do not want to use DCC when making a purchase, then you have the right to refuse the offer and have your transaction billed in the merchant’s local currency, which will then use Visa’s conversion rate.”
If you are so inclined, you can also speak with the store’s management and let them know what you think of the practice of providing DCC as the default payment option. It is hard to imagine that the extra income these businesses earn doesn’t factor into their decision to offer this “convenience” for their customers.
Now that can drain ones bank account way to quick.
I noticed that at boots except when I was there the overage was approx 5.3%. As a frequent traveler I recommend the Charles schwab bank account for ATM usage. They never tack on a surcharge and refund all ATM fees. Right now I like the chase sapphire preferred for my intl cc charges since they charge the interbank rate for foreign transactions.
I have noticed this the first time in Asia. And yes, I agree with you that declining this is almost always better.
I didn’t realize this – thanks for the advice.
Timely advice, Chris. Thanks a million.This only applies to purchase, right? Not Cash Advances?Best of the Season to you.Mike
wow. does this mean i should not use my credit card when we in HK? or should i simply make sure they charge it with the local HK$?
Thanks. Good suggestion.
@Cocoburner – Correct, purchases, not cash advances.@rudyhou – Using a credit card is okay, just make sure you are charged in HKD.@beowulf222 – I’m curious if there is ever a situation where it is better to accept the conversion. Would seem unlikely.@LostSock21 – Didn’t know about the Schwab account. Thanks.@ZSA_MD – @ElusiveWords – @Inciteful – I hope you found the information helpful.@Grannys_Place – At 4% or more per transaction, it sure would inflate the costs of the trip quickly!
@christao408 – I can recall one situation where the conversion offered turned out to be better. That was in Australia. Maybe because consumer protection is bigger there?
i dont travel outside the country and i dont have a credit card… still i find this very useful for those who have one… recommending and posting on FB…
@tribong_upos – Many thanks!