What Is Dynamic Currency Conversion and How Does It Affect You?
If you’re asking the question ‚Äòwhat is dynamic currency conversion’, you’re streets ahead of most credit card holders. Dynamic currency conversion, or DCC, is what happens when you’re charged in your own home currency for a purchase paid for with your credit card in a foreign currency.
In most cases, DCC relates to credit cards used when travelling overseas. The problem is that the vast majority of customers have no idea how much they‚’e actually being charged for the things they purchase internationally.
So what is dynamic currency conversion?
It’s the practice of adding a local conversion charge of around 4% to any purchases you pay for using a credit card that was issued in a different country to where the purchase was made.
Imagine if you were travelling across Europe and you chose to purchase something you wanted. Technically, you would think you were paying in Euros for the purchase, which would incur a rate of around 2% or 3%.
However, some retailers may decide to try and charge you for the purchase amount in Australian dollars instead of Euros. This way, the retailer is able to add 4% to the purchase price.
Now consider this example, but with using a foreign ATM to withdraw cash from your credit card. On the ATM screen before you will be an option whether you want your bill to be in the local currency of the country you’re in, or whether you’d prefer to be billed in Australian dollars.
To help keep your costs as low as possible, always choose the local currency option. While this might sound backwards, the truth is, the ATM owner is quite aware that many travellers have a belief that being billed in the foreign currency might somehow cost them more. They’ll almost always opt to be billed in the home currency, or Australian dollars, which can actually end up costing them more as the charges are higher.
Having credit cards to pay for purchases while you’re travelling overseas can be a great way to avoid carrying large amounts of cash with you. However, it’s also important you ask yourself the question ‚Äòwhat is dynamic currency conversion‘ and understand the repercussions of the potential fees and costs associated with these types of charges.
