Currency exchange transactions can be costly using Dynamic Currency Conversion (DCC). It is a feature offered at many ATMs and point-of-sale terminals abroad that allows you to pay in your home currency for foreign transactions. It is a helpful tool if you are caught in emergencies and avoid conversion calculations, but also one of the ways that drains your travel budget. Continue reading to understand DCC conversion in detail and how to avoid it.
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What is DCC Dynamic Currency Conversion?
The full form of DCC is Dynamic Currency Conversion. It is a merchant-provided service that lets you see your foreign transactions in your home currency at point of sale (POS). It means you can see and pay in your home currency for any transactions abroad. This sounds convenient so far because you can avoid currency conversion math on the spot and understand the price you pay for foreign transactions in your domestic currency.
But, there’s a catch. The currency exchange rates offered through DCC are usually less favourable than the actual rates. This implies you end up paying more for your purchase due to hidden costs and fees.
- DCC is also called Cardholder Preferred Currency (CPC) as it lets you use your credit card for DCC conversion.
- A credit card DCC gives you the option to pay in home currency or local currency during a transaction abroad.
An example of dynamic currency conversion is when you purchase an item in Euros (or any other foreign currency) and pay in your domestic currency (let’s say INR), instead of EUR. The EUR exchange rate converts to INR, making it easier for you to understand the price you are paying for the purchase in your home currency.
DCC and International Students
We understand that travelling to your dream destination for higher studies is exciting. However, by learning about dynamic currency conversion, international students can learn to manage finances in a new country efficiently.
It might seem convenient if you see the option to pay in your home currency with DCC
for your groceries and other stuff. But, the problem is that you might pay more than you need to because DCC rates are much higher than the real exchange rates.
Thus, it can be a costly trap for international students. Read the complete blog to understand how DCC works and why you should avoid it to save money.
Also Read: Fluctuating exchange rates can impact your budget. Learn all about currency hedging and lock currency exchange rates for future transactions, irrespective of the prevailing rate.
Difference Between DCC and Currency Conversion
Currency conversion means exchanging one currency for another at the specified exchange rate. The exchange rate is usually set as per the market conditions and demand and supply of the currency exchanged. When currency conversion is done with your bank or credit card issuer, a small fee known as the currency conversion fee is required.
Currency Conversion transactions = Credit Card payment processor fee + ATM network fee
- Currency conversion fees from credit card processors or ATM networks are typically around 1% of the transaction amount.
- This can add up to 2-3% when combined with their foreign transaction fee.
On the other hand, Dynamic Currency Conversion (DCC) is an optional service offered by some merchants at ATMs and POS terminals. It lets you see and pay the transaction price in your home currency. It is more expensive than standard currency conversion as it includes a markup on the mid-market exchange rate and additional fees.
DDC transactions = Credit Card payment processor fee + ATM network fee + DDC fees
| Currency Conversion | Dynamic Currency Conversion |
| It is provided by your bank or the credit card issuer. | DCC conversion is a third-party service. |
| It lets you see the price in the local currency of the foreign country. | It lets you see the price in your home/ domestic country. |
| The exchange rates are set by the bank or credit card issuer. | The exchange rates are set by the merchant’s service provider. |
| It includes a currency conversion fee and a standard fee by the bank for its service. | It includes a dynamic currency conversion fee as charged by the merchant. |
| It is generally inexpensive and all the costs are mentioned transparently. | It is more expensive and includes hidden DCC fees that are not disclosed. |
Dynamic Currency Conversion Fee
When you make foreign transactions online or abroad, you pay a credit card fee and an ATM service provider fee. However, DCC transactions have a dynamic currency conversion fee because it is a service provided by a third-party operator and not your bank or credit card company. These merchants offer DCC fees that are levied as per their rules and profit margins in addition to the standard conversion fees.
They charge an extra amount over and above the transaction amount. This is how they loot customers and make foreign currency conversion costly. The DDC fee is charged at the normal exchange rate and is not disclosed to you at the time of making payment, making it one of the hidden costs in currency exchange.
Here’s an example, you are buying a shirt for EUR 20. The real exchange rate might be EUR 1 = INR 91. But, with dynamic currency conversion, it could be EUR 1 = INR 91.50. The extra INR 0.50 is the DCC conversion fee. Though the amount may seem small, it adds up quickly, especially for larger transactions.
Credit Card DCC Fee
The credit card DCC fee on all international transactions carried out in INR at international locations is 1% of the translation amount + GST. This applies to many leading Indian banks like IndusInd Bank, Axis Bank, and ICICI Bank that offer DCC conversion.
| Fee for DCC Conversions | |
| Axis Bank | DCC Markup fee of 1% + taxes effective from 5 March, 2023 |
| IndusInd Bank | 1% + GST effective from 6 April, 2023 |
| ICICI Bank | 1% + taxes effective from 5 Feb, 2024 |
Please Note: The mentioned Credit Card DCC Fees are subject to change based on revisions in the bank’s guidelines.
Also Read: Want to save money on forex transactions? Check out the blog on best forex tips for international students that allows you to plan your study abroad budget efficiently.
Should I Pay Using Dynamic Currency Conversion?
It is not advisable to pay using dynamic currency conversion because DCC conversion rates are much higher than standard currency conversion fees. A European study even found markup fees ranging from a hefty 2.6% of the transaction amount.
If you accept DCC, you pay extra in addition to the foreign transaction fee, adding another 3-4% (and up to 7% more to a whopping 12%). On the other hand, standard fees from credit card processors or ATM networks are typically less, around 1% of the transaction amount. This can add up to 2-3% when combined with their foreign transaction fee, but not more than this.
However, let us explore some of the advantages and disadvantages other than transaction fees.
Advantages
- Dynamic Currency Conversion locks in the exchange rate at POS.
- It makes price comparison easier.
- DCC conversion lets you see exchange rates in real-time.
Disadvantages
- The markup fee on DCC transactions is unknown as it is not disclosed.
- Foreign transaction fees are still charged by the card issuer.
- DCC fees are higher than the fees charged by the credit card issuer and ATM network.
How to Avoid DCC Dynamic Currency Conversion?
Dynamic currency conversion is okay for small purchases as the little fee can be worth the convenience of paying in your currency. Also, DCC conversion is the last resort if you are caught in an emergency. However, avoiding DCC conversions can save you a lot of money. Here’s how you can avoid it-
- Say ‘no’ to DCC conversions if offered when making a purchase abroad. They might not directly ask for DCC but may ask if you wish to pay in local currency or your home currency. It is ideal to always choose payments in local currency.
- Consider getting a credit card that specifically doesn’t charge foreign transaction fees. This way, you’ll likely only pay the standard currency conversion fee set by your bank.
- You can also choose Forex cards which a prepaid travel cards. They let you load foreign currency, offer better rates, and budgeting benefits. PNB Multi-currency travel cards and HDFC Forex cards for students are the best options that help you manage your expenses effortlessly.
- It’s always wise to have some local currency on hand for emergencies or small purchases to avoid DCC conversions.
Dynamic Currency Conversion Providers
Although you must avoid DCC conversions, you must be aware of major companies and providers. The list mentions all the DCC providers that provide dynamic currency conversion services to merchants around the world.
| DCC Providers | Country |
| Alliex | Based in South Korea |
| ConCardis | Based in Germany |
| Cuscal | Based in Australia |
| Euronet Worldwide | Based in the US |
| Pure Commerce | Based in Australia |
| Continuum Commerce Solutions | Based in Ireland |
| Elavon | Based in the US |
| Fexco | Based in Ireland |
| First Data | Based in the US |
| Global Blue | Based in Switzerland |
| Monex Financial Services | Based in Ireland |
| Planet | Based in the UK |
| Six Payment Services | Based in Switzerland |
| Travelex | Based in the UK |
| Worldline | Based in France |
Hope this blog made it simpler for you to understand the meaning of dynamic currency conversion and whether you should opt for it. Though, DCC offers convenience (seeing the price in your home currency) but usually at a higher cost. It’s generally recommended to decline DCC and use the standard currency conversion process.
To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
FAQs
Dynamic Currency Conversion (DCC) is a feature offered at many ATMs and point-of-sale terminals abroad, allowing you to pay in your home currency for foreign transactions.
The full form of DCC is Dynamic Currency Conversion. It is a merchant-provided service that lets you see your foreign transactions in your home currency at point-of-sale (POS). It means you can see and pay in your home currency for any transactions abroad.
You can accept dynamic currency conversion. It locks in the exchange rate at POS and makes price comparison easier. However, DCC conversion rates are much higher than standard currency conversion fees that go up to 2.6%- 12% of the transaction amount. Thus, you see if you wish to choose convenience via DCC conversion or pay high prices.
Consider getting a credit card that specifically doesn’t charge foreign transaction fees. This way, you’ll likely only pay the standard currency conversion fee set by your bank.
Dynamic currency conversion fee is the charge levied by the third-party operator/ merchant for letting you see and pay in your home currency for any transactions abroad. It usually ranges from 2.6% to 12% of the transaction amount for additional foreign transaction fees.
You should say ‘no’ to DCC conversions if offered when making a purchase abroad. They might not directly ask for DCC but may ask if you wish to pay in local currency or your home currency. It is ideal to always choose payments in local currency that lets you avoid DCC fees.
DCC providers in the US are Euronet, WorldwideElavon, and First Data. Continuum Commerce Solutions, Fexco, and Monex Financial Services are DCC providers in Ireland. Other DCC providers across the world are Alliex, ConCardis, Cuscal, and Global Blue.
