mnredfox

Using Credit Cards in China - The Great CC Rip Off (dynamic currency conversion)

This thread aims at helping those using CC's in China to avoid and bust the DCC Scam in China. If you use CC's in China, you may be subject to losing up to 10% of your money each time you use your CC, so please read this thread.

What is it?
DCC stands for Dynamic Currency Conversion. When using some CC's in China, the Chinese bank processing the transaction (whoever's POS/CC machine is used) will automatically convert the transaction into your home currency (country of Bank issuing your CC) and charge that to your bank vs RMB. Thus, your CC bill will indicate the transaction was processed in your home currency vs RMB. The transaction instead should be done in RMB with the Chinese bank charging your bank the RMB amount, then your bank converting to your home currency at a FAIR market rate.

For historical exchange rate data, see this link.

Why is it a "scam"?
First, when many machines detect a foreign CC it automatically selects DCC. Second, DCC receipts indicate you were given a choice to select DCC or opt out when in fact you were not. Third (and most important), with DCC the Chinese bank will give you an unfair rate (typ 4-6% lower than market) when converting to your home currency resulting in a huge loss (gain for them). This occurs at with every foreign CC transaction at every machine that does DCC. The vast majority of foreigners don't know what it is, and for those that do most do not even know how to fight it. Thus, it is a scam.

Lastly, most service people in China do NOT know what DCC is and that the transaction is truly in RMB. When you point out the evidence indicating DCC (see "How can I tell it is happening to me?" below), most service people assume all foreign cards result in that occurring. In fact, many will claim (unknowingly and mistakenly) that they are charging in RMB as indicated on the receipt and your home currency number is only a reference, and also that they cannot select anything else. This is not true.

Where does it occur?
This can occur at almost any machine that accepts CC's in China. However, it is most prevalent at hotels (incl Western chains), some restaurants, and many tourist/souvenir shops. This scam occurs (as reported) only to Visa cards and MC, however it has not yet been reported for Discover, or American Express. It has been reported to mostly occur with Bank of China (BOC) POS machines, though there have been reports with HSBC, China Construction Bank (CCB), and China Bank of Communications (CBC) machines as well.

How can I tell it is happening to me?
It is very easy. There are a few ways:
1. First, on the top of the receipt you might see "DCC" Printed. Not all banks do this though.
2. You will see reference to your local currency and an exchange rate on your receipt. This may be in very small print.
3. You will see text similar to "I declare I have been offered a choice of payment currencies and my choice is final..."

See:-------BOC Example-------BOC Example-------HSBC Example-------HSBC Example

How do I avoid/stop it?
First, refer to these instructions:
DCC Instructions (thanks to jair101)

Then, DO NOT CIRCLE THE RMB AMOUNT. In many other locations such as Europe and Hong Kong when offered a choice you can simply circle the currency of choice. This will not work and you will be charged in your home currency. Instead, ask the transaction to be cancelled and then processed according to the instructions below depending on the processing bank.

1. For Bank of China (BOC) machines or China Construction Bank (CCB) machines, see instructions to print out/save on a smartphone and show to vendor.
2. For HSBC, jamar has provided instructions that appear to finally crack the HSBC scam (only works for chip & pin cards though). Please post your experiences using the instructions in this thread.
3. For Bank of Communications machines, we yet have found a way to stop DCC. Please help us post if you can successfully stop the DCC with Bank of Communications. For now, your best resolution is to call your bank.

HSBC seems to require a code to opt-out or select functions. See tips here and here, and here. Recent reports (as of May 2011) indicate HSBC DCC receipts seem to offer a choice to select currencies. See this example. Please send us/post any experience with these.

Helpful Terms in Chinese:
- Bank of China: zhongguo yinhang 中国银行
- HSBC: huifeng yinhang 汇丰银行
- China Construction Bank: jianshe yinhang 建设银行
- Bank of Communications: jiatong yinhang 交通银行
- Exchange rate: hui lu 汇率
- Convert: dui huan 兑换
- RMB or Yuan: renminbi/yuan 人民币/元
- Lose money: kui qian 亏钱
- Charge/swipe credit card: shua ka 刷卡
- Instructions: zhishi 指示
- Credit card machine: xiaoshou zhongduan ji 销售终端机
- Cancel: qu xiao 取消

mntblue

During my recent trip to Shanghai, I have found that the dynamic currency conversion scam prevelant among high end establishments. Since I think a special place in hell needs to be reserved for establishments who scam their paying customers, I am going to list some of them here:

M on the bund;
Jade Garden, all branches incl. Paradise Garden;
Crystal Jade in XTD;
Le Royal Meridian hotel;

FLLDL

did they ask which currency you wanted the charges processed in before they ran them?

Braindrain

Can you describe the scam?

From personal experience, some people claim paying a few % more on conversation is a scam.

moondog

There's plenty of info about it on google. I too noticed a dramatic uptick in DCC during my most recent pass through China. In all but one case (HRC in BJ), getting the transactions processed properly didn't require much extra effort.

FLLDL: IME, establishments rarely ask before employing DCC. If your cc receipt shows up and the bottom line is in USD (or another non local currency), you know they're trying to DCC you.

anacapamalibu

The merchant gets a lower transaction rate if they employ this. They are not
forced into it.

moondog

The HRC manager claimed he had no way around it until I put him on the spot and he called his merchant bank.

anacapamalibu

Employing DCC could cut the credit card processing fee in half for the merchant. Merchant wins, bank wins, customer loses.

moondog

Yes, there's no doubt that they win. I calculated the implied exchange rates on one of my DCC receipts and it was a full 5% off of the prevailing rate at the time.

anacapamalibu

You always have to read before you sign.
They must disclose that you have currency options.

credit card receipt:

ie: I delcare I have been offered a choice of payment currencies and my choice is final.....

so technically even if you signed the cc receipt. You can dispute the charge if you were not offered the currency charge. You must try to resolve with the merchant, but a dispute pulls the money out of the merhcant's account
and excessive chargebacks increase their cc proccessing rate and can lead to
canceleing the merchant account.

So check your receipt. If you were not verbally offered currency choice than that is a breach of the merchant's agreement with the bank credit card processing.

moondog

BoC doesn't obey this rule.

jiejie

I try to minimize credit card use in China (and elsewhere in Asia, for that matter). But when I use my USA-based card, I take the proactive approach and tell them straight out before they run the transaction: You must charge me in <local currency> not USD. I've only had one point of resistance on this, and it was in Thailand not China. In that case I told them it was either baht or I walk/no transaction. (They folded.) I suggest it's easier to take a stand up front than argue for rights and refunds after the fact.

RichardInSF

I take the opposite approach: I maximize card use since despite the exchange charge, the cost to me is still lower than the rate from ATMs.

Never say never, but I haven't run into this problem so far in China, I've always been billed in RMB. Maybe I just go to low class places!

anacapamalibu

I am looking at a current BoC receipt and that verbage is on the bottom. Also a receipt from Standard Chartered with the same type of disclaimer.

Whoever thought up this revenue stream is very smart. Most people will
think they are saving money by having the merchant do the currency conversion. However this scheme is completely dishonest to the point I would call it fraud.

jiejie

Cash works for me in most situations since I have bank accounts here and usually just periodically withdraw a wad and store in my home safe, rarely using ATM's. Also, I have local (in China and Thailand) accounts with ATM cards for withdrawing local currency directly, and intl bank ATM cards that I don't incur fees for using and which give the official interbank exchange rate. Many if not most merchants here charge extra 3-5% just for using a foreign credit card. I've become quite the Chinese cheapskate and don't like this if I can easily avoid it by paying cash. YMMV.

I just used my (US) card yesterday at an airline office, and in keeping with my SOP, told them to run the charges in Chinese RMB not dollars. They did, no problem. But on the slip in "fine print" was the optional forex conversion and rate had I elected to have it run in dollars--I would have paid an extra 3.5% due to the poor exchange rate. DCC is definitely a sneaky practice. Stay alert out there!