The Currency Conversion on Credit Cards

When traveling abroad, the credit card is often the safest method of payment, most convenient and least expensive in terms of exchange fees. But tourists should be wary of traders who are more likely to offer them to convert their purchases in their own currency.


Dynamic Currency ConversionThe “dynamic currency conversion” or DCC is particularly popular in the tourism and entertainment, such as hotels, restaurants and department stores.


The principle is simple: the merchant payment terminal recognizes the origin of the credit card buyers. If your credit card is from the United States, the terminal will offer to convert the purchase amount in American dollars.


Traders present the dynamic conversion as a service to “value added” that allows customers to immediately know the final amount of purchase.


However, the exchange rate is generally disadvantageous. Visa speaks of fees 5% (2.5% in the same exchange rate, plus 2.5% fee). But in the duty-free shops at airports, dynamic conversion can be even more expensive. Experience shows that a traveler can easily lose 20$ exchange fee on purchase of 100 Euros, the equivalent cost of approximately 15%.


And that’s not all: the issuer of the credit card in America can then add fee, usually 2.5%.


In fact, it is the dealers who take advantage of dynamic conversion because they receive part of the profits arising from the conversion. This allows them to counter charges more salty than they needed for Visa and MasterCard transactions using credit cards, especially those with more generous rewards programs (Infinite).


Even if they are not VISA and MasterCard that perform dynamic conversion, the two giants still impose rules. Thus, the trader must provide sufficient information to consumers so that they can make an informed choice. And the client should always have the choice to refuse the conversion.


But in practice, the costs are not always well marked. And the client is difficult to assess if the exchange rate is favorable or not … unless we follow the evolution of the foreign exchange market during his trip.


In general, it is better to refuse the dynamic conversion.

Originally posted 2013-04-16 05:30:47. Republished by Blog Post Promoter