Dynamic Currency Conversion (DCC): Common questions answered

Imagine shopping in a foreign country and being able to pay in your home currency instead of the local one. This is dynamic currency conversion (DCC).

Here’s how DCC works – You get the option of using your home currency when making purchases or withdrawing cash abroad. While this may sound tempting, since it gives you a better idea of your expenses, DCC can significantly increase your overall costs due to its hidden fees.

Dynamic currency conversion providers calculate your bills and charge your credit or debit card in your native currency, which is then transferred to the merchant's bank account. However, this often results in an unfavourable exchange rate. Moreover, DCC providers also levy various other charges on the transaction, which can further increase your expenses.

DCC can be a handy payment option if you prioritise convenience over savings. But to avoid extra costs, you can pay in the country’s local currency and let your bank handle the conversion.

A DCC transaction is one in which you choose to pay in your native country instead of the local currency of the country you are visiting. Most people opt for a DCC transaction for convenience, meaning the ability to pay in your native currency, which spares you the mental maths of tracking your expenses.

However, such transactions often come with a hidden DCC fee, which can increase your expenses. The DCC markup fee charged on top of your expenses is usually higher than interbank rates and can be quite costly. Moreover, DCC providers also provide an unfavourable exchange rate compared to banks, which can further impact your transactions.

When shopping abroad, dynamic currency conversion (DCC) allows you to pay in your native currency at checkout. However, this payment method often results in hidden fees.

But how exactly does DCC work, and is it different for credit card transactions? DCC allows instant currency conversion of your transactions so that you can pay in your native currency. This process remains the same whether you are transacting with your debit card or your credit card – while making the payment, you are prompted to choose between your native currency and the local one.

If you opt out of transacting in your native currency, DCC charges will not be applied. Instead, a markup fee is charged to your credit card based on your bank’s policies. This fee covers the cost of processing transactions in foreign currencies and across different cards and banks.

When withdrawing cash overseas, choosing dynamic currency conversion at an ATM can result in hidden fees. The markup fees on currency conversion are levied similarly to DCC transactions carried out when purchasing abroad.

DCC charges are levied on your cash withdrawals through prompts asking you to choose between withdrawing in your native currency instead of the local one. Choosing your native currency results in its conversion on the spot, with added DCC fees, resulting in higher expenditure.

DCC charges are added fees levied on your transactions or cash withdrawals when you opt to transact/withdraw in your native currency rather than the local one. These include the DCC markup fees, currency conversion charges, and transaction fees.

DCC markup fees typically range from 3-7% of the foreign exchange transaction amount based on the difference in the exchange rate applied by the DCC provider compared to interbank rates. Some DCC providers also levied currency conversion charges and transaction fees to cover the administrative costs of converting and processing the transactions.

While the DCC charges that may apply to your transactions vary based on the provider, you can avoid them altogether by opting to transact in the local currency.

The major dynamic currency conversion providers include companies like FEXCO, Planet Payment, and Elavon, which provide currency conversion services worldwide. These DCC companies partner with merchants and banks to provide on-the-spot, real-time currency conversion when you can transact or withdraw cash in your native country while travelling abroad.

While the currency conversion services provided by DCC companies can be quite convenient, saving you the hassle of dealing with an unfamiliar currency, they often come at the cost of additional DCC charges that increase your expenditure amount.