4 Reasons to Avoid Dynamic Currency Conversion
You just got your passports, travel ticket, travel insurance, and credit card ready, but are you aware of dynamic currency conversion (DCC)? You probably are excited about the trip, but it is important you research and read about DCC first to be on the safer side.
Going to a new foreign country can be exciting and scary at the same time, and most people are afraid that someone might rip them off. However, people don’t lose money to burglars and thieves only; there is a legal way of ripping foreign traveler’s money.
Find out why dynamic currency conversion is a ‘legal fraud’ you should be aware of.
What Is Dynamic Currency Conversion?
Some people prefer to change their country’s currency into the foreign country’s currency that they are visiting. Other visitors don’t see the need to because merchants often offer to convert the payments. This could lead to you overspending.
When you make purchases abroad, the merchant asks you to choose a currency of payment. When you choose to pay with your country’s cash, the merchant converts your money into their country’s currency, and an exchange rate applies.
The exchange rate would still apply if you did it yourself. But, converting the cash at the merchant’s charges you a dynamic currency conversion fee that you won’t notice. The merchants don’t also tell you.
DCC rips you a lot of money because it happens in every purchase you make. Most people prefer it because it is convenient at that time. After all, you don’t want to do the hustle of converting the currency.
Reasons People Choose Dynamic Currency Conversion
Most people choose to let the merchant do the currency conversion because of a couple of reasons. Take a look at these reasons.
Exchange Rate Transparency
When the merchant converts the currency on your behalf, you choose the rate to use, and you can see everything going on at the moment. This enables you to know how much you spend on every purchase and how much you owe the credit card company.
Allowing a merchant to exchange your currency before traveling is not fun. That is because people traveling abroad don’t like standing in long queues to convert currency.
This is also a cumbersome process because if you don’t get enough cash for the trip, you will have to keep going back to the exchange merchant.
The worst part about exchanging currencies is dealing with cash in your entire trip instead of using plastic money. Moreover, if you change more money into the country’s currency, you will need to change it back to your country’s currency.
The many risks of dealing with cash are another reason people don’t like exchanging currencies. Since most travelers do not want to go to the merchant for conversion, they prefer using dynamic currency conversion.
Why You Should Avoid Dynamic Currency Conversion
Here are the reasons you should not use dynamic currency conversion.
As convenient as DCC might look, it has more harm than benefits. The merchants will show you the exchange rates and ensure you agree to them before proceeding, but they will not disclose the margin percentage included at the end of the sale.
The margin percentage differs from the conversion rate and only benefits the merchant and the service provider. You will therefore pay more than you were to pay if you did not opt for direct conversion.
A Foreign Transaction Fee Applies Regardless of the Currency You Use
Most people opt for the DCC to avoid converting the currency into foreign currency during purchase. Some believe that they will not pay the bank a foreign transaction fee by doing this, which is not true.
The credit card terms state that you will pay a transaction fee for foreign transactions, regardless of the currency you use. This fee is for the purchase you make abroad. Note that it is not a conversion fee.
When you opt for DCC, you will pay a foreign transaction fee and an additional margin that they don’t tell you about at the time of purchase. This makes your purchase cost more, and you will pay more for your credit card.
DCC Costs You a Currency Conversion Fee
Besides the exchange rates, you will suffer more during the conversion. Letting the merchant do the conversion imposes a currency conversion fee on top of your bill.
Paying the foreign transaction fees and currency conversion fee raises the cost by a significant margin that you won’t know at the time.
DCC is Not Limited to the In-Person Purchase
If you have purchased anything from abroad using Amazon or PayPal, or any other application, you must have come across DCC. The process also affects online purchasers of items abroad.
How to Avoid Dynamic Currency Conversion at an ATM
Although foreign purchases are inevitable if you prefer importing items or are a traveler, the good news is that you can avoid dynamic currency conversion.
These tips will save you money during your trip.
Convert Your Money to Cash
You might not be for the idea of carrying cash on your abroad trip because most transactions nowadays are plasticized. However, getting a foreign country’s currency before traveling will save you many unnecessary fees on your purchases.
Also, you can carry with you a debit card that charges little or no foreign transaction fee, and you can withdraw money every time you need to pay for service.
Having the merchant converts the currency for you is not a free service! Say no if they offer to and opt for local currency payment every time you pay for purchases. Always ensure you check the final bill and also check the billing currency.
You are likely to be affected a lot by direct currency conversion if you travel often. Research on cards and banks that offer very low or fee-free usage for your abroad transactions. As a result, this will save you a lot.
You might suffer currency conversions many times, from purchasing in-person to online. This is because some merchants default transactions to dynamic currency conversions. However, you always need to reject and choose to pay in your local currency to avoid the conversion rates. As a result, you will save a lot of money on the transaction fees.