According to wikipedia, dynamic currency conversion (DCC), also known as Cardholder Preferred Currency (CPC) is:
a financial service in which holders of credit cards have the cost of a transaction converted to their local currency when making a payment in a foreign currency. Currently this feature is only possible for Visa and MasterCard networks
My receipt on the left from a recent stay at the Le Meridien New Delhi is an example of this. I paid the bill using my Chase Sapphire Preferred card. As you can see, Indian Rupees (28674.63) are converted to US dollars (553.03) with an exchange rate of 1 USD = 51.85 INR from the local Axis Bank.
What most people don’t know is that there is a charge for this conversion. On the receipt, you can see that there is a “markup” of 0.035. I am not quite sure what that means in terms of percentage. This essentially gives you a worse exchange rate than your credit card issuing bank would have given you. For example, the exchange rate that I got on my other transactions from Chase bank was roughly 1 USD = 54.6 INR, much better than that from Axis Bank. That means that I essentially lost $28 dollars from this ridiculous dynamic currency conversion at Le Meridien.
If you look at the text on the bottom of the receipt, it says:
Dynamic Currency Conversion is conducted by the merchant and is not associated with or endorsed by Visa. Cardholder’s selected transaction currency is final. Cardholder has been offered a choice of currencies for payment, including the merchant’s local currency. Cardholder expressly agrees to the transaction receipt information by marking the “accept box” below.
Well, the funny thing is that when I checked out, I was not given a choice of paying in local currency. I was just handed this receipt to sign after I told them to charge my Sapphire Preferred card. When I asked why it showed US dollars, I was told, “Sir, foreigners sometimes like to see the charges in their own currency.”
It was the first time I had seen this, and I didn’t know enough about the topic to argue with him. After leaving, I quickly realized that I had paid a lot more than I should have. After doing some reading on this thread, I learned that this is a common occurrence at hotels and restaurants, and one is not likely to catch it if they are not aware of it. In addition to this extra money that you are paying for the currency conversion, if you use a credit card that has foreign transaction fees, then you would pay those fees as well.
So, if you are traveling internationally, you should check to make sure that your receipts are in the local currency only. If you see non-local currency on your receipt, then you are losing money with dynamic currency conversion. You should tell the hotel or restaurant to reverse the transaction and to do it again in the local currency. In addition, use a credit card with no foreign transaction fees to prevent losing even more money.
Finally, I think that Le Meridien and all other hotels should really train their employees to understand this stuff and give a choice to their guests. I shouldn’t feel like I have just been conned when I check out of a hotel, especially with words like “Sir, foreigners sometimes like to see the charges in their own currency.”
Has this ever happened to you? What did you do about it?