Jan 18, 2014, 10:10 pm
Last edit by: emilio911
What is it?
Dynamic Currency Conversion (DCC) is a "service" some merchants and ATM operators offer that will charge a cardholder in the native currency of the card rather than the local currency. A more complete definition and examples are available via this Wikipedia article on DCC. While sold as a convenience to cardholders traveling outside of their home country, it is a pure profit play by the merchants. You may end up paying a fee of up to 8% over the purchase price for accepting DCC. Always decline DCC and asked to be billed in the local currency!
Where will I see it?
You can be hit with DCC anywhere there is a difference between your debit or credit card's denominated currency and the currency of the location where you're trying to use the card. The most common example will be at a merchant overseas, but now some ATMs are offering the service too. While many US cardholders complain about getting tricked into accepting DCC overseas, some merchants in the US have started to use DCC as well.
What is the issue?
Unless you're the merchant or ATM operator, there isn't much benefit to using DCC. Some customers say they prefer knowing exactly how much they'll be charged in their home currency or may not know the exchange rate of the place where they are visiting. For example, if you are in Prague for two days and you don't know how much the Czech Koruna is worth relative to the US Dollar, you might feel more comfortable knowing that you're buying an item for $205.00 versus 4000 CZK. However, the real exchange rate as of January 18, 2014 would place 4000 CZK at $197.18. You just paid an extra $7.82 for the "convenience" of knowing how much you'd be charged!
DCC often charges about a 4% premium over the true exchange rate. The problems don't stop there since many US banks still charge a 3% foreign transaction fee (FTF) for purchases made outside of the US. Not only would you get hit with the $205.00 charge, you could also find yourself facing a total charge of $211.15 if your card has a 3% FTF.
This is a pure money grab from the merchants, and it's billed as an easy way to squeeze additional revenue out of the transaction. Numerous [1, 2] articles have talked about DCC duping many consumers. Discover even has a warning about being tricked into DCC when using a card abroad.
For example, this FlyerTalk member reported that Avis charged his Saudi credit card in Saudi riyals instead of USD for a car rental in Florida without his consent. This has also been a trend for hotels, particularly large chains as indicated here and here.
DCC is simply not worth it for the consumer. Unless you like paying a convenience fee of up to 5% of the total transaction just to know how much you will be billed, you should always decline DCC and ask to be billed in local currency when handing over your card.
Furthermore, it is in your interest to obtain a card that has a 0% FTF. FlyerTalk member kebosabi maintains a fairly comprehensive spreadsheet of EMV-enabled cards ideal for overseas travel, many of which offer a low or 0% FTF as a feature. There is also a wiki at FlyerGuide of various FTF of debit and credit cards.
What can I do to avoid DCC?
American Express currently does not support DCC on its network, so you are safe from DCC if using an American Express card. However, Visa and MasterCard card networks can support DCC, so be vigilant when purchasing abroad with a Visa or MasterCard branded card. There have been reports of being charged DCC with a Discover card in China [citation needed], but primarily the issue is happening with Visa and MasterCard cards.
Before handing your card to the merchant, always specify clearly that you want to be charged in the local currency and that you do not want DCC. For some transactions, you retain control of your card as you dip it into a chip reader and can view on a screen to select which currency you want to use for the transaction. Always select the local currencyto get the best exchange rate. Do not select the card's native currency!
Similarly, for ATM withdrawals, make sure you decline any kind of conversions. Some good examples of what to look for when using an ATM overseas are here and here. You're probably coming off of a long flight and fatigued, but educating yourself beforehand can save you from getting ripped off. The user interfaces on almost all of these ATMs are set up to encourage you to take the bait, and you have to be extremely vigilant not to fall for it.
If you are doing a PIN-based transaction, you should have the opportunity to review the total amount and denomination of the transaction before entering your PIN. If you are doing a signature transaction and the merchant has processed your transaction with DCC, cross out the amount and write "DCC refused" on the receipt. Do not sign the receipt, and demand that the merchant reverse the transaction and run it in the local currency. If no verification is required due to a small purchase amount, ask the merchant to reverse the charge and repeat the transaction using local currency. If all else fails, file a dispute with your card issuer when you return home. Even if it's immaterial, the banks will get the message like they did with EMV.
Some merchants will claim that their systems have to bill you in your native currency. This is a complete lie. But just like a mag stripe only card, this is battle where you have to be prepared. Don't settle for merchants claiming that "it has to be done this way" or "pay cash if you don't want this". Be prepared to walk away, and, if you must complete the transaction, write "DCC refused & merchant didn't give a choice" on the receipt and cross out the amount. Let the merchant know that you will be filing a dispute with your bank.
Disabling DCC
Disabling DCC on ANZ terminals in Australia
ANZ markets DCC as Customer Preferred Currency (CPC). Terminal operators can contact ANZ Merchant Services at 1800 039 025 to have this feature disabled. Currently, your Visa or MasterCard will be subjected to DCC if denominated in: CAD, CHF, DKK, EUR, GBP, HKD, JPY, MYR, NOK, NZD, SEK, SGD, THB, USD, or ZAR. All DCC transactions on ANZ will cause a 2.5% markup. Steps to avoid DCC:
If you see a signature slip with DCC verbiage and a checkbox indicating a currency selection, kindly ask the merchant to void the transaction. If it's a PIN-based transaction, you have an additional opportunity to cancel the transaction because it will ask for your PIN a second time. For instance, if you see "EUR 17.29 KEY PIN" refuse to enter your PIN and start again.
Disabling DCC in China
There are many reports of forced DCC in China, and there is a great thread [closed to new posts] on DCC in China on the the China Destinations forum.
Disabling DCC on Bankcomm terminals in Beijing http://www.hongkongcard.com/forum/fo...p?id=12272&p=2 #19
jair101's DCC instructions of March 2011 http://www.etveg.com/misc/DCC_China.pdf
Disabling DCC in Eurozone and UK
DCC offered in tourist traps (Harrods Knightsbridge/Galleries Lafayette Montparnesse/El Cortes Ingles Grand Via Madrid)
Unlike the rest of the world, Visa Europe does not require merchants to collect a ticked box on the slip (presumably because merchants there don't keep signed slips under Chip-and-PIN)
El Cortes Ingles collects a signature electronically and the DCC selection is made on the signature pad - the choice is respected.
Harrods and GL rely on cashier input in the POS for the currency choice - the cashier may forget to ask. The POS do not offer voiding (only refunds), but since you're given a slip to sign the best thing to do is to deface it before signing and submit chargeback request to issuer bank on return home.
There may be smaller merchants who also collect DCC but I seemed to have pre-empted most of them by saying "charge Euros (Pounds) please"
In Spain all merchants by law are required to provide you with a complaint form called an hoja de reclamaciones if requested. The form has two carbon copies. The customer retains one copy as a record of the complaint. The merchant maintains another copy, and the third is sent to the local consumer protection bureau. Merchants are also required to post a sign conspicuously informing the customer of the right to complain (usually in Spanish and English). Do not accept the lie that they don't have any forms. This is illegal, and you are able to call the police if the merchant refuses to provide you with this official form. It's interesting to see merchants start to squirm when you know the rules, and most merchants will start to be accommodating after you mention it. (Please still fill out the form even if the merchant cooperates after mentioning it because these are likely the merchants who won't otherwise change their behavior.)
Disabling DCC in Hong Kong and Macau
Hong Kong and Macau can get as non-compliant as China, possibly because many acquirers have cross-border operations and know they can get away with non-compliant firmware and procedures.
In practice, if you are given a DCC slip, and the cashier has not taken a choice before giving you your copy, the slip will be processed in your home currency - be prepared to dispute.
Unable to disable Global Payments DCC in Hong Kong instance #1, instance #2
Unable to disable DBS DCC in Fortress Electronics HK
Unable to disable BoC DCC in Free Duty HK
Disabling DCC in Japan and Korea
Japan's just starting out http://www.flyertalk.com/forum/japan...ing-japan.html and http://www.hongkongcard.com/forum/fo...p?id=3939&p=17 #168 but there are no reports I know of where cardholders are compelled to use DCC against their will.
Korea is also not much affected by DCC but where offered, trying to opt out is harder than Japan due to the language barrier (both verbal and written)
http://www.hongkongcard.com/forum/fo...hp?id=4303&p=3 #23
http://www.hongkongcard.com/forum/fo...p?id=12272&p=2 #11
Disabling DCC in the Maldives
Disabling DCC on Global Payment terminals in the Maldives
Disabling DCC in Thailand and Taiwan
DCC present but generally not an issue. Cashier will generate quote slip is usually generated and pass to cardholder. When cardholder refuses, a verbage-free slip denominated in THB/TWD will be produced.
Certain Taiwan hotels may take deposits in cardholder currency. But these are only pre-authorisations and can be voided in full for TWD-only final checkout payments.
Disabling DCC on Websites
Airbnb - (Since the "loophole" seem not to work anymore, please report if you chargeback the DCC.
)
Hotwire - You need to select your preferred currency before making a search.
PayPal - The instructions to stop the DCC on a recurring charge are here.
I got duped by DCC already before I found this thread. Is there anything I can do?
If you've been hit with DCC and the merchant did not follow the Visa/MC rules, you should file a dispute with your card issuer. Even if the transaction is a small amount, it's worth it to dispute the charge on principle. Do not let merchants get away with this scam uncontested!
If you were not clearly given a choice of currencies and did not specifically communicate a preference to be billed in your card's native currency - if you did not accept DCC - then you have recourse when filing a dispute with your card issuer. The Visa Product and Service Rules clearly state (p 339):
You can even use terminology from Visa Product and Service Rules when filing the dispute, giving Reason Code 76: Incorrect Currency or Transaction Code. Reason Code 76 is used when the transaction was processed with an incorrect transaction code, or an incorrect currency code, or one of the following:
MasterCard's rules also clearly state that the POI Currency Conversion must be decided by both the merchant and customer. When filing a dispute with a MasterCard, list chargeback Reason Code 4846 from the MasterCard Chargeback Guide, which covers POI currency conversion disputes in the following circumstances:
You do have a choice of currencies. Exercise that choice!
Do not get taken by surprise when faced with DCC, and know your options. As Visa/MC purport, you do have a choice of currencies, but you need to make that choice heard! Don't be complacent in this sneaky tactic by some merchants to pad revenues.
Before going to a different country, get educated. Understand the exchange rate relative to your native currency. Know how to recognize when the merchant is trying to force DCC on the transaction, and pull out all of the stops to make sure it doesn't happen to you.
If you have a chip-and-PIN credit card, it's easier to control the transaction to try to prevent DCC. With chip-and-signature, if you get an uncooperative merchant, deface the merchant's copy of the receipt. Write LOCAL OPTION NOT OFFERED, cross out the DCC currency amount, and sign the receipt.
This will give additional evidence when filing a dispute to get the DCC charges refunded. When filing the dispute, you can use the Visa Exchange Rate Calculator or MasterCard's Currency Conversion Tool to determine the Visa or MasterCard exchange rate on the date the transaction posted to your credit card. Compare this to the DCC value to figure out the amount by which the merchant overcharged you. Don't forget to add in any Foreign Transaction Fee if your card has one. (If it does, you should really consider finding a card for use overseas without a FTF.)
Example Images (click for a larger image)
Hotel receipts in China, the Netherlands, and Dubai respectively:
Purchase receipts in China and Korea:
Cancelled translation in Hong Kong:
Novotel in Shenzen:
Dynamic Currency Conversion (DCC) is a "service" some merchants and ATM operators offer that will charge a cardholder in the native currency of the card rather than the local currency. A more complete definition and examples are available via this Wikipedia article on DCC. While sold as a convenience to cardholders traveling outside of their home country, it is a pure profit play by the merchants. You may end up paying a fee of up to 8% over the purchase price for accepting DCC. Always decline DCC and asked to be billed in the local currency!
Where will I see it?
You can be hit with DCC anywhere there is a difference between your debit or credit card's denominated currency and the currency of the location where you're trying to use the card. The most common example will be at a merchant overseas, but now some ATMs are offering the service too. While many US cardholders complain about getting tricked into accepting DCC overseas, some merchants in the US have started to use DCC as well.
What is the issue?
Unless you're the merchant or ATM operator, there isn't much benefit to using DCC. Some customers say they prefer knowing exactly how much they'll be charged in their home currency or may not know the exchange rate of the place where they are visiting. For example, if you are in Prague for two days and you don't know how much the Czech Koruna is worth relative to the US Dollar, you might feel more comfortable knowing that you're buying an item for $205.00 versus 4000 CZK. However, the real exchange rate as of January 18, 2014 would place 4000 CZK at $197.18. You just paid an extra $7.82 for the "convenience" of knowing how much you'd be charged!
DCC often charges about a 4% premium over the true exchange rate. The problems don't stop there since many US banks still charge a 3% foreign transaction fee (FTF) for purchases made outside of the US. Not only would you get hit with the $205.00 charge, you could also find yourself facing a total charge of $211.15 if your card has a 3% FTF.
This is a pure money grab from the merchants, and it's billed as an easy way to squeeze additional revenue out of the transaction. Numerous [1, 2] articles have talked about DCC duping many consumers. Discover even has a warning about being tricked into DCC when using a card abroad.
For example, this FlyerTalk member reported that Avis charged his Saudi credit card in Saudi riyals instead of USD for a car rental in Florida without his consent. This has also been a trend for hotels, particularly large chains as indicated here and here.
DCC is simply not worth it for the consumer. Unless you like paying a convenience fee of up to 5% of the total transaction just to know how much you will be billed, you should always decline DCC and ask to be billed in local currency when handing over your card.
Furthermore, it is in your interest to obtain a card that has a 0% FTF. FlyerTalk member kebosabi maintains a fairly comprehensive spreadsheet of EMV-enabled cards ideal for overseas travel, many of which offer a low or 0% FTF as a feature. There is also a wiki at FlyerGuide of various FTF of debit and credit cards.
What can I do to avoid DCC?
American Express currently does not support DCC on its network, so you are safe from DCC if using an American Express card. However, Visa and MasterCard card networks can support DCC, so be vigilant when purchasing abroad with a Visa or MasterCard branded card. There have been reports of being charged DCC with a Discover card in China [citation needed], but primarily the issue is happening with Visa and MasterCard cards.
Before handing your card to the merchant, always specify clearly that you want to be charged in the local currency and that you do not want DCC. For some transactions, you retain control of your card as you dip it into a chip reader and can view on a screen to select which currency you want to use for the transaction. Always select the local currencyto get the best exchange rate. Do not select the card's native currency!
Similarly, for ATM withdrawals, make sure you decline any kind of conversions. Some good examples of what to look for when using an ATM overseas are here and here. You're probably coming off of a long flight and fatigued, but educating yourself beforehand can save you from getting ripped off. The user interfaces on almost all of these ATMs are set up to encourage you to take the bait, and you have to be extremely vigilant not to fall for it.
If you are doing a PIN-based transaction, you should have the opportunity to review the total amount and denomination of the transaction before entering your PIN. If you are doing a signature transaction and the merchant has processed your transaction with DCC, cross out the amount and write "DCC refused" on the receipt. Do not sign the receipt, and demand that the merchant reverse the transaction and run it in the local currency. If no verification is required due to a small purchase amount, ask the merchant to reverse the charge and repeat the transaction using local currency. If all else fails, file a dispute with your card issuer when you return home. Even if it's immaterial, the banks will get the message like they did with EMV.
Some merchants will claim that their systems have to bill you in your native currency. This is a complete lie. But just like a mag stripe only card, this is battle where you have to be prepared. Don't settle for merchants claiming that "it has to be done this way" or "pay cash if you don't want this". Be prepared to walk away, and, if you must complete the transaction, write "DCC refused & merchant didn't give a choice" on the receipt and cross out the amount. Let the merchant know that you will be filing a dispute with your bank.
Disabling DCC
Disabling DCC on ANZ terminals in Australia
ANZ markets DCC as Customer Preferred Currency (CPC). Terminal operators can contact ANZ Merchant Services at 1800 039 025 to have this feature disabled. Currently, your Visa or MasterCard will be subjected to DCC if denominated in: CAD, CHF, DKK, EUR, GBP, HKD, JPY, MYR, NOK, NZD, SEK, SGD, THB, USD, or ZAR. All DCC transactions on ANZ will cause a 2.5% markup. Steps to avoid DCC:
- Insert, swipe, or tap your payment card
- Have the cashier select credit (CR)
- The terminal will display CREDIT ACCOUNT
- If applicable, enter your PIN
- The terminal will display PROCESSING \ PLEASE WAIT
- The terminal will display EXCH <exchange rate> \ <currency> <amount> \ ACCEPT RATE? \ ENTER=YES CLR=NO
- Instruct the cashier to press the yellow CLEAR (CLR) button (If entering a PIN, you can retain the terminal to perform this step yourself. If entering a signature, you can ask for the terminal to control this process, not indicating that it's a chip-and-signature card.)
- The transaction should now process without DCC
If you see a signature slip with DCC verbiage and a checkbox indicating a currency selection, kindly ask the merchant to void the transaction. If it's a PIN-based transaction, you have an additional opportunity to cancel the transaction because it will ask for your PIN a second time. For instance, if you see "EUR 17.29 KEY PIN" refuse to enter your PIN and start again.
Disabling DCC in China
There are many reports of forced DCC in China, and there is a great thread [closed to new posts] on DCC in China on the the China Destinations forum.
Disabling DCC on Bankcomm terminals in Beijing http://www.hongkongcard.com/forum/fo...p?id=12272&p=2 #19
jair101's DCC instructions of March 2011 http://www.etveg.com/misc/DCC_China.pdf
Disabling DCC in Eurozone and UK
DCC offered in tourist traps (Harrods Knightsbridge/Galleries Lafayette Montparnesse/El Cortes Ingles Grand Via Madrid)
Unlike the rest of the world, Visa Europe does not require merchants to collect a ticked box on the slip (presumably because merchants there don't keep signed slips under Chip-and-PIN)
El Cortes Ingles collects a signature electronically and the DCC selection is made on the signature pad - the choice is respected.
Harrods and GL rely on cashier input in the POS for the currency choice - the cashier may forget to ask. The POS do not offer voiding (only refunds), but since you're given a slip to sign the best thing to do is to deface it before signing and submit chargeback request to issuer bank on return home.
There may be smaller merchants who also collect DCC but I seemed to have pre-empted most of them by saying "charge Euros (Pounds) please"
In Spain all merchants by law are required to provide you with a complaint form called an hoja de reclamaciones if requested. The form has two carbon copies. The customer retains one copy as a record of the complaint. The merchant maintains another copy, and the third is sent to the local consumer protection bureau. Merchants are also required to post a sign conspicuously informing the customer of the right to complain (usually in Spanish and English). Do not accept the lie that they don't have any forms. This is illegal, and you are able to call the police if the merchant refuses to provide you with this official form. It's interesting to see merchants start to squirm when you know the rules, and most merchants will start to be accommodating after you mention it. (Please still fill out the form even if the merchant cooperates after mentioning it because these are likely the merchants who won't otherwise change their behavior.)
Disabling DCC in Hong Kong and Macau
Hong Kong and Macau can get as non-compliant as China, possibly because many acquirers have cross-border operations and know they can get away with non-compliant firmware and procedures.
In practice, if you are given a DCC slip, and the cashier has not taken a choice before giving you your copy, the slip will be processed in your home currency - be prepared to dispute.
Unable to disable Global Payments DCC in Hong Kong instance #1, instance #2
Unable to disable DBS DCC in Fortress Electronics HK
Unable to disable BoC DCC in Free Duty HK
Disabling DCC in Japan and Korea
Japan's just starting out http://www.flyertalk.com/forum/japan...ing-japan.html and http://www.hongkongcard.com/forum/fo...p?id=3939&p=17 #168 but there are no reports I know of where cardholders are compelled to use DCC against their will.
Korea is also not much affected by DCC but where offered, trying to opt out is harder than Japan due to the language barrier (both verbal and written)
http://www.hongkongcard.com/forum/fo...hp?id=4303&p=3 #23
http://www.hongkongcard.com/forum/fo...p?id=12272&p=2 #11
Disabling DCC in the Maldives
Disabling DCC on Global Payment terminals in the Maldives
Disabling DCC in Thailand and Taiwan
DCC present but generally not an issue. Cashier will generate quote slip is usually generated and pass to cardholder. When cardholder refuses, a verbage-free slip denominated in THB/TWD will be produced.
Certain Taiwan hotels may take deposits in cardholder currency. But these are only pre-authorisations and can be voided in full for TWD-only final checkout payments.
Disabling DCC on Websites
Airbnb - (Since the "loophole" seem not to work anymore, please report if you chargeback the DCC.
)Hotwire - You need to select your preferred currency before making a search.
PayPal - The instructions to stop the DCC on a recurring charge are here.
I got duped by DCC already before I found this thread. Is there anything I can do?
If you've been hit with DCC and the merchant did not follow the Visa/MC rules, you should file a dispute with your card issuer. Even if the transaction is a small amount, it's worth it to dispute the charge on principle. Do not let merchants get away with this scam uncontested!
If you were not clearly given a choice of currencies and did not specifically communicate a preference to be billed in your card's native currency - if you did not accept DCC - then you have recourse when filing a dispute with your card issuer. The Visa Product and Service Rules clearly state (p 339):
- Merchants that offer DCC must be compliant with the regulations
- Inform the cardholder that DCC is optional
- Not impose any additional requirements to use local currency
- Not use any language or procedures that may cause the cardholder to choose DCC by default
- Not convert a transaction in the local currency to the card's billing currency after the transaction has completed
- Ensure that the cardholder expressly agrees to DCC
You can even use terminology from Visa Product and Service Rules when filing the dispute, giving Reason Code 76: Incorrect Currency or Transaction Code. Reason Code 76 is used when the transaction was processed with an incorrect transaction code, or an incorrect currency code, or one of the following:
- Merchant did not deposit a transaction receipt in the country where the transaction occurred
- Cardholder was not advised that Dynamic Currency Conversion (DCC) would occur
- Cardholder was refused the choice of paying in the merchant’s local currency
- Merchant processed a credit refund and did not process a reversal or adjustment within 30 calendar days for a transaction receipt processed in error
MasterCard's rules also clearly state that the POI Currency Conversion must be decided by both the merchant and customer. When filing a dispute with a MasterCard, list chargeback Reason Code 4846 from the MasterCard Chargeback Guide, which covers POI currency conversion disputes in the following circumstances:
- The cardholder states that he or she was not given the opportunity to choose the desired currency in which the transactions was completed or did not agree to the currency of the transaction, or
- POI currency conversion took place into a currency that is not the cardholder's billing currency, or
- POI currency conversion took place when the goods or services were priced in the cardholder's billing currency, or
- POI currency conversion took place when cash was disbursed in the cardholdeer's billing currency.
You do have a choice of currencies. Exercise that choice!
Do not get taken by surprise when faced with DCC, and know your options. As Visa/MC purport, you do have a choice of currencies, but you need to make that choice heard! Don't be complacent in this sneaky tactic by some merchants to pad revenues.
Before going to a different country, get educated. Understand the exchange rate relative to your native currency. Know how to recognize when the merchant is trying to force DCC on the transaction, and pull out all of the stops to make sure it doesn't happen to you.
If you have a chip-and-PIN credit card, it's easier to control the transaction to try to prevent DCC. With chip-and-signature, if you get an uncooperative merchant, deface the merchant's copy of the receipt. Write LOCAL OPTION NOT OFFERED, cross out the DCC currency amount, and sign the receipt.
This will give additional evidence when filing a dispute to get the DCC charges refunded. When filing the dispute, you can use the Visa Exchange Rate Calculator or MasterCard's Currency Conversion Tool to determine the Visa or MasterCard exchange rate on the date the transaction posted to your credit card. Compare this to the DCC value to figure out the amount by which the merchant overcharged you. Don't forget to add in any Foreign Transaction Fee if your card has one. (If it does, you should really consider finding a card for use overseas without a FTF.
)Example Images (click for a larger image)
Hotel receipts in China, the Netherlands, and Dubai respectively:
Purchase receipts in China and Korea:
Cancelled translation in Hong Kong:
Novotel in Shenzen:
Dynamic Currency Conversion (DCC) [2014-2016]
Oct 18, 2014, 4:20 am
#1246
Join Date: Jan 2008
Location: Rio de Janeiro, Miami, Nice
Programs: Marriott Titanium, AA Concierge Key, Delta, United, Emorates, and others
Posts: 4,694
That's right. Somewhere along the way issuers in the US switched from currency exchange fees on cards to foreign transaction fees. So even if the customer accepts DCC or the case of an online merchant whose acquirer is overseas, you still get whacked with any FTF that your card imposes.
The bottom line is that Visa/MC impose a 1% currency exchange fee and pass this on to the issuer when a currency exchange happens. The issuer then typically adds a 2% markup. I tend to think customers just bend over and take it when it comes to overseas transactions, assuming that's just the price one pays for traveling abroad.
I personally find the 1% fee that Visa/MC impose to be acceptable due to the costs of handling different currencies. I can even somewhat justify AmEx's rate of 2.7% for personal cards with a FTF since their operations are smaller worldwide. However, I would still contend AmEx's true cost of conversion is much lower. I understand that there are risks converting currencies, and there are some currencies that fluctuate relative to one another than others such that the 1% fee is reasonable. It would be far too complicated to have a list of different exchange rates for different countries, so they set the bar at 1%. I'm fine if banks pass along this 1% fee to me as the customer but only if the conversion actually takes place. In the case of DCC or a foreign acquirer pricing in USD, the issuer that charges 3% is pocketing the entire amount.
On the other hand, I've described DCC exchange rates as usurious, which they are. I've seen anywhere between 3.95-4.99% as the offer, but the high exchange rates a... exchange risk that a single acquirer assumes results in a rip-off exchange rate.
The bottom line is that Visa/MC impose a 1% currency exchange fee and pass this on to the issuer when a currency exchange happens. The issuer then typically adds a 2% markup. I tend to think customers just bend over and take it when it comes to overseas transactions, assuming that's just the price one pays for traveling abroad.
I personally find the 1% fee that Visa/MC impose to be acceptable due to the costs of handling different currencies. I can even somewhat justify AmEx's rate of 2.7% for personal cards with a FTF since their operations are smaller worldwide. However, I would still contend AmEx's true cost of conversion is much lower. I understand that there are risks converting currencies, and there are some currencies that fluctuate relative to one another than others such that the 1% fee is reasonable. It would be far too complicated to have a list of different exchange rates for different countries, so they set the bar at 1%. I'm fine if banks pass along this 1% fee to me as the customer but only if the conversion actually takes place. In the case of DCC or a foreign acquirer pricing in USD, the issuer that charges 3% is pocketing the entire amount.
On the other hand, I've described DCC exchange rates as usurious, which they are. I've seen anywhere between 3.95-4.99% as the offer, but the high exchange rates a... exchange risk that a single acquirer assumes results in a rip-off exchange rate.
Other things remaining equal it works that way. But, some countries are different, including China a perhaps the most highly variable case.
Oct 18, 2014, 7:27 am
#1247
Original Poster
Join Date: Jul 2009
Location: SJC
Programs: AA, AS, Marriott
Posts: 6,056
The actual FX transaction is usually made (practice varies by issuer,country and acquirer) by the first processor in the issuers currency. In general those rates are near typical interbank exchange rates when the transaction is processed, which also varies. The typical variation MC, V and AE are mostly a result of timing. All three make profit on FX, but generally well within typical corporate rate bands. The historical 1% of MC and V also was an arbitrary charge in increase profits.
Oct 18, 2014, 7:46 am
#1248
Original Poster
Join Date: Jul 2009
Location: SJC
Programs: AA, AS, Marriott
Posts: 6,056
I am still waiting for the reservations department of the hotel to get back to me as the front desk agent denied they had performed the conversion and insisted my credit card company must have converted it to GBP.
Does anyone have any experience of this? I am guessing the same rules apply and that they have to have my consent to do the conversion?
Oct 18, 2014, 9:45 am
#1249
Ambassador, Hong Kong and Macau
Join Date: May 2009
Location: HKG
Programs: Non-top tier Asia Miles member
Posts: 19,763
Jbcarioca: "The FTF is a fee imposed by a card issuer whenever a transaction is originated with an acquirer outside the issuers country. It has no logic in costs or justification other than additional profit fir the issuer."
1. At least in the case of 0.8% with mastercards, doesn't MasterCard inc. earn this, not the issuer?
2. If no foreign conversion occurred, can't FTF be justified by cost of cross-border settlement anyway?
For instance if Ba.com collected HKD679.00 from the uk. Assuming my hypothesis that BA received HKD and have not converted it is right, Visa has de facto HK$679 remittance for BA.
It might do this by offsetting, but eventually Visa will have to make some remittances to net settle its positions from time to time. Surely it is entitled to earn a fee for that?
The cheapskate is britishairways.com and others airlines having similar practices, for being able to perform multi-currency transactions at its head office and having card associations or customers pay the cost of patriating funds home (as opposed to using a merchant account in each country).
1. At least in the case of 0.8% with mastercards, doesn't MasterCard inc. earn this, not the issuer?
2. If no foreign conversion occurred, can't FTF be justified by cost of cross-border settlement anyway?
For instance if Ba.com collected HKD679.00 from the uk. Assuming my hypothesis that BA received HKD and have not converted it is right, Visa has de facto HK$679 remittance for BA.
It might do this by offsetting, but eventually Visa will have to make some remittances to net settle its positions from time to time. Surely it is entitled to earn a fee for that?
The cheapskate is britishairways.com and others airlines having similar practices, for being able to perform multi-currency transactions at its head office and having card associations or customers pay the cost of patriating funds home (as opposed to using a merchant account in each country).
Oct 18, 2014, 7:10 pm
#1250
Join Date: Feb 2013
Location: Irvine CA & PEK
Programs: Hyatt Globalist, Marriott Titanium, Hilton Diamond, IHG Spire Ambassador, Qantas Platinum, United S
Posts: 664
The reason I used wire transfer receiving fee as an analogy, is that banks are required to do something (although I'm not sure how much) for receiving cross-border funds, and the price tag for that is around $40.
In the case of CC, if a transaction happens abroad, and although everything is done electronically by Visa/MC, are banks still required to perform extra tasks for these cross-border CC transactions than for domestic transactions?
My point is wire transfers are done electronically by SWIFT network as well, and I doubt banks sort these SWIFT telegraphs by hand...
Please don't get me wrong, if home currency is charge abroad, Visa/MC won't charge the 1%, then charging 3% is pure ugly more profit for banks. Maybe banks adding 2% on top of the networks' 1% was intended to offset the somewhat workload for performing cross-border CC transactions. And, maybe banks realized DCC took it all away and there is still extra work for cross-border home currency transaction...
In the case of CC, if a transaction happens abroad, and although everything is done electronically by Visa/MC, are banks still required to perform extra tasks for these cross-border CC transactions than for domestic transactions?
My point is wire transfers are done electronically by SWIFT network as well, and I doubt banks sort these SWIFT telegraphs by hand...
Please don't get me wrong, if home currency is charge abroad, Visa/MC won't charge the 1%, then charging 3% is pure ugly more profit for banks. Maybe banks adding 2% on top of the networks' 1% was intended to offset the somewhat workload for performing cross-border CC transactions. And, maybe banks realized DCC took it all away and there is still extra work for cross-border home currency transaction...
Oct 18, 2014, 8:36 pm
#1251
Join Date: Jul 2007
Posts: 1,762
Historically currency exchange was something performed by banks. Assuming we're talking about travellers, not corporations exchanging millions of one currency for another, this was a part of the game when travelling abroad before credit cards. I well remember either having to go to the bank to get travellers cheques or actual foreign currency or exchanging currency upon arrival in some other country. Many people still do this today of course (usually those who still live in the 20th century).
But today so many of these transactions are either done via ATM's in the country of arrival or via credit card transactions for pujrchases. Now foreign currency fees were based on the idea that banks had to stock the various currencies and physically make provisions to move banknotes in the various currencies. But today, for example a credit card charge, the exchange is electronic in nature. Visa (or MC or Amex) handles millions of these exchanges daily and they are all done on paper not based on actual currency. Same goes for ATM transactions. The ATM dispenses local currency. The actual amount charged to the consumer is electronically determined by whatever the exchange rate is at the moment the transaction hits the network. If I pull Ł20 from an ATM in London, when the transaction hits the network it is converted electronically to the USD equivalent. No physical exchange of currency tgakes place.
So the excuse that foreign currency and foreign transaction fees are needed to cover the costs of stocking the various currencies is unadulterated nonsense.
But today so many of these transactions are either done via ATM's in the country of arrival or via credit card transactions for pujrchases. Now foreign currency fees were based on the idea that banks had to stock the various currencies and physically make provisions to move banknotes in the various currencies. But today, for example a credit card charge, the exchange is electronic in nature. Visa (or MC or Amex) handles millions of these exchanges daily and they are all done on paper not based on actual currency. Same goes for ATM transactions. The ATM dispenses local currency. The actual amount charged to the consumer is electronically determined by whatever the exchange rate is at the moment the transaction hits the network. If I pull Ł20 from an ATM in London, when the transaction hits the network it is converted electronically to the USD equivalent. No physical exchange of currency tgakes place.
So the excuse that foreign currency and foreign transaction fees are needed to cover the costs of stocking the various currencies is unadulterated nonsense.
Oct 18, 2014, 10:38 pm
#1252
Join Date: Feb 2013
Location: Irvine CA & PEK
Programs: Hyatt Globalist, Marriott Titanium, Hilton Diamond, IHG Spire Ambassador, Qantas Platinum, United S
Posts: 664
Historically currency exchange was something performed by banks. Assuming we're talking about travellers, not corporations exchanging millions of one currency for another, this was a part of the game when travelling abroad before credit cards. I well remember either having to go to the bank to get travellers cheques or actual foreign currency or exchanging currency upon arrival in some other country. Many people still do this today of course (usually those who still live in the 20th century).
But today so many of these transactions are either done via ATM's in the country of arrival or via credit card transactions for pujrchases. Now foreign currency fees were based on the idea that banks had to stock the various currencies and physically make provisions to move banknotes in the various currencies. But today, for example a credit card charge, the exchange is electronic in nature. Visa (or MC or Amex) handles millions of these exchanges daily and they are all done on paper not based on actual currency. Same goes for ATM transactions. The ATM dispenses local currency. The actual amount charged to the consumer is electronically determined by whatever the exchange rate is at the moment the transaction hits the network. If I pull Ł20 from an ATM in London, when the transaction hits the network it is converted electronically to the USD equivalent. No physical exchange of currency tgakes place.
So the excuse that foreign currency and foreign transaction fees are needed to cover the costs of stocking the various currencies is unadulterated nonsense.
But today so many of these transactions are either done via ATM's in the country of arrival or via credit card transactions for pujrchases. Now foreign currency fees were based on the idea that banks had to stock the various currencies and physically make provisions to move banknotes in the various currencies. But today, for example a credit card charge, the exchange is electronic in nature. Visa (or MC or Amex) handles millions of these exchanges daily and they are all done on paper not based on actual currency. Same goes for ATM transactions. The ATM dispenses local currency. The actual amount charged to the consumer is electronically determined by whatever the exchange rate is at the moment the transaction hits the network. If I pull Ł20 from an ATM in London, when the transaction hits the network it is converted electronically to the USD equivalent. No physical exchange of currency tgakes place.
So the excuse that foreign currency and foreign transaction fees are needed to cover the costs of stocking the various currencies is unadulterated nonsense.
But is there extra workload in handling cross-border CC transactions? I say this is that I assume the "workload" is the basis for charging international wire transfer receiving fees (dealing with SWIFT telegrams, remittance, and so forth).
Oct 19, 2014, 2:23 am
#1253
Ambassador, Hong Kong and Macau
Join Date: May 2009
Location: HKG
Programs: Non-top tier Asia Miles member
Posts: 19,763
I forgot to mention DCC is a currency conversion process, not a fee.
Oct 19, 2014, 10:56 am
#1254
Join Date: May 2012
Location: SIN
Programs: JL GC | Marriott LT Silver | Global Entry | SQ Silver
Posts: 6,819
Singapore has a pretty good overseas earning Amex - the UOB PRVI which earned 2.5 miles per 1S$ (roughly 3.25 miles/US$) spent overseas.
HK *used* to have a similar Amex - the Standard Chartered American Express which earned 1 mile per HK$2.5 (roughly 3.12 mile/US$) spent overseas. Sadly the card's overseas earn rate has recently been halved and the next best foreign currency earning card is V/MC only.
HK *used* to have a similar Amex - the Standard Chartered American Express which earned 1 mile per HK$2.5 (roughly 3.12 mile/US$) spent overseas. Sadly the card's overseas earn rate has recently been halved and the next best foreign currency earning card is V/MC only.
Oct 19, 2014, 11:35 am
#1255
Ambassador, Hong Kong and Macau
Join Date: May 2009
Location: HKG
Programs: Non-top tier Asia Miles member
Posts: 19,763
lcpteck - but foreign currency conversion fees are pretty steep on that card - 3.25%. For SCB HK AE it was 2%...
Oct 19, 2014, 2:25 pm
#1256
Join Date: May 2012
Location: SIN
Programs: JL GC | Marriott LT Silver | Global Entry | SQ Silver
Posts: 6,819
Oct 21, 2014, 5:45 am
#1257
Join Date: May 2007
Location: NJ
Posts: 46
Wow. I received a call from Chase dispute department just 5 minutes ago. Long story short:
The customer rep who just called me was the original person who had received my dispute document via fax. She entered the information into the dispute system and called me, but missed her call. Her colleague followed up with what transpired last night.
The original rep made a reminder for herself to try me again and saw the notes on my account as what had happened. She called me just now and said, are you satisfied with the resolution of your dispute?
I said, well no. And she said, Yes I agree. She understands what DCC is and the impact, and said the paperwork I have provided is black and white. She initiated the charge back and put a temp credit of $83.76 USD on my account and asked me to wait 45 days for the merchant to respond. If not, it becomes permanent.
I told her she had restored my faith in people knowing to do the right thing. She replied, that its not ethical what the merchant did, and thanked me for being so patient.
^
The customer rep who just called me was the original person who had received my dispute document via fax. She entered the information into the dispute system and called me, but missed her call. Her colleague followed up with what transpired last night.
The original rep made a reminder for herself to try me again and saw the notes on my account as what had happened. She called me just now and said, are you satisfied with the resolution of your dispute?
I said, well no. And she said, Yes I agree. She understands what DCC is and the impact, and said the paperwork I have provided is black and white. She initiated the charge back and put a temp credit of $83.76 USD on my account and asked me to wait 45 days for the merchant to respond. If not, it becomes permanent.
I told her she had restored my faith in people knowing to do the right thing. She replied, that its not ethical what the merchant did, and thanked me for being so patient.
^
Oct 21, 2014, 6:10 am
#1258
Join Date: Feb 2013
Location: Irvine CA & PEK
Programs: Hyatt Globalist, Marriott Titanium, Hilton Diamond, IHG Spire Ambassador, Qantas Platinum, United S
Posts: 664
Anyone in this forum has publicity or related-NGO background?
This public awareness issue is something that can be worked on.
This public awareness issue is something that can be worked on.
Oct 21, 2014, 7:55 am
#1259
Original Poster
Join Date: Jul 2009
Location: SJC
Programs: AA, AS, Marriott
Posts: 6,056
Great news! Most of the CSRs & dispute managers for my credit cards (CapitalOne & Chase) are totally clueless when it comes to DCC and the resulting overcharges. Most have never heard of it before & seem quite surprised after I explain what it is and how widespread it has gotten. This leads me to believe that very few people dispute forced DCC overcharges & most assume it's just how it works when using your card overseas.
Oct 21, 2014, 9:16 am
#1260
Join Date: Jul 2007
Posts: 1,762
One must remember the people who participate on this forum tend to be seasoned travellers. Many Americans are not. They have no idea about currency and the like. Some are even surprised that foreign merchants do not take US currency b ecause after all, or so they think, the US dollar is supreme and everybody should take dollars. So after a day or two trying to deal with foreign currencies, going into merchants who tell them something costs €4.80 just hold out a bunch of coins and say take what you need. So when they come to a merchant who tells them they can be charged in USD, to them it is a relief and they have no concept they are being ripped off or they believe one of the 3 great lies (we have no control over it, you lock in a good rate, no speak English) and think this is being done for their convenience. Especially after exchanging cash and having been ripped off there (do remember most cash goes about 10% over interbank rates, dcc at 7% above interbank seems a bargain not unjderstanding that with a proper choice of credit card, you can more or less get the interbank rate).
Hence dcc lives on as a sucker is born every day.
Hence dcc lives on as a sucker is born every day.
