Dynamic Currency Conversion can leave you out of pocket, but what is it?

Dynamic Currency Conversion can leave you out of pocket when you use your credit or debit card to buy things whilst aboard, but what is it and how does it work?

There’s a new practice sweeping the holiday destinations of Europe this year that can catch out the unwary using credit and debit cards. Dynamic Currency Conversion (DCC) converts the charge for the goods or services you buy from the local currency into that of your home country – for UK cardholder Sterling. So in Turkey instead of being presented with a bill in Turkish Lira you will be presented with one in Sterling. OK, maybe that doesn’t appear to be a problem because most visitors will understand Sterling better than the local currency, but the Devil is in the detail as always. To convert the bill from the local currency into Sterling the trader will have used a foreign exchange conversion rate, and that’s where the smoke and mirrors come into play. The conversion rate could well be much lower than that you would get using your cards to pay using the local currency and only those with a quick mathematical mind might pick this up before they sign.

Most banks charge a foreign transaction loading fee starting at around 2.75% for foreign transactions. However, if the trader uses DCC this charge isn’t made. But how can you check the deal you are presented with is good value without having the latest exchange rates to hand and doing your sums?

This practice is perfectly legal and has been introduced by Visa Europe. Their operating rules say that the cardholder should be given a choice. If the cardholder chooses DCC, additional information including conversion rates and any fees must be provided on the transaction receipt. However, actual practice might be very different. So, if you are presented with a bill in Sterling ask for the bill in the local currency and compare. If the trader refuses to provide the bill in the local currency then you have a choice, either pay up and complain to Visa (or your bank) when you arrive back or pay them in cash.

Nationwide Building Society card users should steer well clear of DCC. The Nationwide doesn’t charge its customers the foreign loading fee and any payments made using DCC will bypass the Visa system and you will have paid the fee in the conversion.