There have been several threads on, or relating to, this topic during the past year+, but I'm starting this new one in order to consolidate the discussion in a forum that is likely to reach as wide an audience as possible.

First, here are some of the other threads:

http://www.flyertalk.com/forum/starw...-currency.html
http://www.flyertalk.com/forum/china...-dcc-scam.html
http://www.flyertalk.com/forum/other...d-illegal.html

For anyone that isn't familiar with DCC, it refers to the practice in which merchants are permitted to give foreign customers a choice of transaction currencies, typically: 1) local currency; and 2) home country currency.

When you "select" anything other than local currency, you end up paying a premium over Visa's exchange rate. In my case, this amounted to 3.23% (average/ transaction) during a recent trip to China.

I use the "select" term loosely because, in many cases, there isn't a practical way to opt out of DCC. (A common theme in the above threads is, "I never allow merchants to charge me in USD.") I'll give you 3 examples: 1) business dinner in which you don't want to look cheap; 2) charges for close in transportation; and 3) merchant incompetence. #3 is especially difficult to overcome, and typically not worth the hassle (i.e. you might end up wasting 30 minutes for the sake of principle... and $1.50).

In essence, I've found that DCC is effectively impossible to avoid 20% of the time when it is offered, and ~40% of the merchants I encountered during my recent trip offered it. What's more, the latter number appears to be growing at an alarming rate (up from ~30% last October; data collected in Shanghai and Beijing on both trips). In aggregate, 8% of my transactions were affected.

Instead of signing my DCC receipts, I wrote "DECLINE" in the signature field and proceeded to take up the case with FIA Card Services upon my return to the US. This proved to be much more difficult (and time consuming) than I had envisioned. While there is a dispute mechanism in the books, I gather that it is so rarely used that the FIA people had no clue about it. For that matter, they weren't aware of DCC either. The process was so annoying that I gave up after my first 3 phone calls, but a bit of encouragement from Mountain Trader prompted me to finish it off.

Closing points:
-since the amount of money at issue is small in most individual cases, the vast majority of people will continue to accept this practice (on the off chance that they are aware of it in the first place)
-more and more merchants will gravitate towards it as a source of free revenue
-if people like us make a stink, we might be able to affect some sort of change
-anyone who's contemplating a dispute is welcome to email me; I'll provide you with a letter template, complete with embedded spreadsheet

I certainly understand your example of not pursuing this on a business dinner charge (no problems, I am expensing it anyway); the rest of the time, I've not had trouble asking the merchant to void the initial attempt to charge me in USD and re-process the charge in local currency. Takes perhaps a minute more of my time, that's all. Two recent examples were in BKK at King Power duty free and at a hotel in CNX.

While I try to scrutinize every charge slip for this practise, it is easy to forget sometimes.

I believe with one exception (Mexico) I've always been asked which I would prefer.

Moondog-

It seems I have backed into being your yogi on DCC. And as Yogi said "When you come to a fork in the road.............".

Two cases of DCC (or DCC-like) I'll relate. The first was in Paris about 4 years ago at a small bistro. It was a young relative's birthday and they treated us like royalty-including our dog. I got the DCC charge slip, and for the $3-$4 difference, I let it slide. I really think that bistro owner just got a better card rate from a slick salesman, and, anyway, I took it out of the tip.

The second case was Hertz in Italy last year. I booked in Euros, told the desk agent I wanted to be billed in Euros, wrote "Bill in Euros" on the rental agreement, but they still ran it through the DCC. I had a weeks' long email exchange with Hertz corporate, and they even asked Hertz Italy for a copy of the paperwork. Only when they didn't get a response did they give me a credit for a little more than what the DCC mark-up was. I don't know if I was an exception to standard practice-I think they claim that you have a choice, and if that is so in practice, that's how things should be.

Onward soldiers, onward................

I was just ripped off by Virgin Blue of Australia when purchasing a ticket online. At no point in the booking process did the website offer me the choice between paying in Australian Dollars or my own currency (US Dollars). Only when I looked at my receipt did I see the disclosure that I was charged in US Dollars, after a 3.75% markup.

What really steams me is that they have the gall to add "Cardholder choice is final" on the receipt.

Since your case is easy (one transaction), I'm happy to help you out with a letter:

BTW, Visa probably wasn't offering the WSJ exchange rate in the first place, but your bank will surely let this slide because they'd need to burn at least $20 in internal resources for the sake of a few pennies. If you don't have access to the historical rate, you can either make it up or calculate it based on a transaction around the same date (and amend the letter accordingly).

Thanks Moondog.

In my case I don't need to look up the interbank rate because my receipt explicitly says the markup was 3.75%:

"This transaction is based on Reuters Wholesale Interbank exchange rate plus 3.75 percent international conversion margin."

So Virgin Blue did disclose the markup after I completed my transaction, but not during. Nowhere during the booking process was I informed that I was going to be charged in my own currency at a mark-up, let alone given the option to decline it. I even went through a dummy booking process to double check.

I'm actually a little surprised that Virgin Blue is so brazenly violating Visa's rules.

When you are charged a 3.75% markup like this are you still charged the credit card company's 3% foreign transaction fee, or does one replace the other making the net added cost to the customer 0.75%

In that case, you're simplest path is to simply replace "WSJ" with "Reuters Wholesale Interbank" and calculate the rate.

For the calculation:
1) first of all, we need to think about this in terms of USD/AUD, which means the fx rate will be less than 1
2) take the amount you were charged in USD and divide by the amount you were promised in USD
3) this will provide you with the exchange rate you were offered --0.90991 based on today's rate (I've already tacked on the extra points here)
4) divide the result from #3 by 1.0375, and that's your Reuters rate, 0.87703 today
5) for "which means I would have been charged", the proper amount is your USD price multiplied by the result from #4

I don't mean to offend you in the event you can do pull off this stuff in a heartbeat on your own. Part of the reason that I've sunk so much time into this exercise is that I recently started a hedge fund that entails a currency component (in particular, I'm trying to figure out a way to short JPY and, simultaneously, go long on CNY), so I'm brushing up on some of the things I learned 10+ years back in school.

The amount charged by the merchant is on top of the foreign transaction fee charged by your card issuer. Most US card issuers charge you 3% whenever the transaction was completed outside of the US, regardless of the currency.

(I use the Schwab/FIA Visa, which actually doesn't charge a foreign transaction fee at all, but that's besides the point.)

Thanks for the illustration, Moondog. I'm actually a number cruncher by profession ; below are the actual numbers if anyone is interested:

The receipt states the AUD amount is $685, which Virgin Blue converted to $628.80 USD after a 3.75% margin. Therefore, the amount I should have been charged without the margin would be $606.07 USD (= 628.80 / 1.0375), and the margin they should credit back to me is $22.73 USD (= 628.80 - 606.07).

Or equivalently, $25.69 AUD (= 685 * 3.75%).

If you go to www.oanda.com, there's a link toward the bottom of the page where you can find historical exchange rates for most currencies.

Don't trust their percentages. I had one of these scam merchants (Goldcar Rentals on Gran Canaria) pull the DCC stunt on me recently. The contract claimed it was a 2.25% fee, but their exchange rate was $1.41+ and the midmarket interbank rate on that date for the euro was never above 1.35. Either they flunked math or they are applying their percentage to a rate that already contained some amount over the interbank rate.

Look up the actual mid-market interbank rate.

THey may pull a trick like RyanAir.

Buying a ticket on the RyanAir website, the price is shown in euros all the waty through, including in big figures at the bottom right on the page where you click to purchase. What many miss is a very small but pre-checked box off to the left that offers currency conversion. To avoid your purchase being charged in your own currency at a very bad rate, you have to find and uncheck this box.

Under US consumer law, this would clearly be deemed an ''unfair and deceptive business practice'' and they would get reamed out in the courts for it. I am wondering if a class action against US based credit card companies like MC and Visa for ALLOWING these things to be done might work to put a stop to these frauds.

http://www.flyertalk.com/forum/europ...l#post20829662