One hundred dollar bills currency
Photograph ©2016 by Brian Cohen.

What is Dynamic Currency Conversion — and Why You Should Avoid It When Possible

Travelers seem to be slammed with a plethora of unfair fees — such as resort fees and fuel surcharges — but another scourge known as dynamic currency conversion has been “spreading like a cancer metastasizing through the travelling world” in recent years.

I could not think of a better metaphor that the aforementioned one offered by FlyerTalk member JEFFJAGUAR — but what exactly is dynamic currency conversion?

What is Dynamic Currency Conversion — and Why You Should Avoid It When Possible

Because travelers deal with different currencies when visiting other countries, some operators of automated teller machines of banks and merchants offer you the opportunity to pay for a product or service in the currency of your home country with the illusion that it is being done for your convenience — but usually at a significantly increased cost which translates into pure profit for the seller. You may actually see on a credit card receipt prior to paying for a product or service a choice of which currency you would like to use to pay. This is known as dynamic currency conversion.

There was only one time I actually paid for dynamic currency conversion when the practice was in its infancy several years ago. I was at a shop where I was searching for a small gift. The salesperson offered to wrap the gift for me free of charge — and because I was using a credit card, I was asked if I preferred to pay in the currency of the country in which I was in at that time; or would I rather pay in the currency of the country in which I am a citizen. As an American citizen, I chose to pay with United States dollars — primarily because the credit card with which I was paying at the time charged a foreign transaction fee of three percent on any purchase using a currency different than the United States dollar.

I would up overpaying for the item anyway by a dollar and some change — but the premium was approximately eight percent of the purchase price of the item. That eight percent premium is little more than pure profit for the merchant — and I would not be surprised if part of it went to the salesperson as a commission for selling the “convenience” to me.

After that experience, I have never paid for dynamic currency conversion ever again — meaning that the reason why you should avoid it whenever possible is that you will virtually never benefit from it due to the usurious rates at which you are paying for the “convenience” of the “service.”

Why Would Someone Want Dynamic Currency Conversion?

Dealing with currency which is different from that of your native country introduces several factors which could cause someone who would rather not deal with figuring out the numbers and simply pay for the product or service in the currency of which he or she is familiar.

The exchange rate is one factor. Sure, figuring out that one of one currency is equal to ten of another currency is rather easy — but there are different rates to purchasing and selling currency; and the conversion rate is rarely as easy as a round number such as ten percent. Let us say that you purchased too much currency. If you sold it back to the same place from where you purchased it, you will lose some money because the buy and sell rates are different; and that difference always benefits the currency exchange company.

If that was not bad enough, some currency exchange places charge what initially appears to be an excellent exchange rate — only to find out that a percentage of the transaction is charged in addition to the exchange rate for commission. Which is better — a high currency exchange rate with no commission charged; or a low currency exchange rate with an addition charge for a commission?

Unfortunately, there is no easy answer to that question. You would have to shop around to get the best deal — perhaps dealing with someone who does not speak your language in order to get that information — which could cause some travelers to be uncomfortable.

As mentioned earlier in this article, foreign transaction fees can be charged on your transaction by the company which issued your credit card — typically at three percent interest in addition to the cost of the transaction itself. Paying for something in your native currency can help you avoid the foreign transaction fee; but you will almost always wind up paying more anyway — even with that savings…

…and why would someone use a credit card which charges foreign transaction fees? Without taking into account other benefits which may be offered by the credit card, a credit card with no annual fee will more often than not charge a foreign transaction fee. The consumer has to decide which costs less overall: the annual fee of a credit card which has no foreign transaction fee; or a credit card with no annual fee which does charge a foreign transaction fee for every product or service purchased in a different currency.

There are exceptions to the rule, of course: there are credit cards with no annual fee that do not charge a foreign transaction fee; and there are credit cards which charge an annual fee that also charge a foreign transaction fee. However, you have to take all of the advantages and disadvantages offered by each credit card to arrive at an informed and educated decision as to whether or not you would ultimately benefit from it.

To avoid all of that figuring to get the best deal, some people actually believe that simply accepting dynamic currency conversion is the best choice overall. Financially, it virtually never is the best choice — but of course, that depends on how much someone will actually pay for that nominal “convenience.”

How to Avoid Dynamic Currency Conversion

You have a right to choose what exchange rate and fees you are willing to pay and not have the merchant decide for you.

“When travelling international make sure the card you’re using does not have a foreign transaction fee”, advises William Charles of Doctor of Credit in this article. “There are multitudes of cards that no longer charge this fee, make sure you use one that doesn’t. Use this spreadsheet for a complete list of which cards offer no foreign transaction fees and chip + PIN technology.”

Here is the advice offered by William Charles:

  • Neither Discover Card nor American Express use dynamic currency conversion — but Discover is rarely accepted outside of the United States anyway
  • Ask to be billed for your product or service in local currency
  • Check your receipts carefully to ensure no dynamic currency conversion has been charged — and if you notice that you have been charged with dynamic currency conversion, then ask for the transaction to be voided and ask to be billed in the local currency; and consider shopping elsewhere
  • Do not fall for scare tactics such as “Merchant Preferred Rate” — aptly named because the merchant enjoys as close to pure profit from offering dynamic currency conversion
  • Consumers must be asked if they want the charge to be processed in their primary currency — so if you are not asked this, then the merchant is breaking the rules of Visa and MasterCard; and you should dispute the charge


As with financial plays by merchants to offer and push services which are as close to pure profit as possible — such as resort fees and fuel surcharges — dynamic currency conversion is little more than a legal scam perpetrated on unsuspecting consumers. It is up to you to be educated enough to avoid paying dynamic currency conversion rates whenever possible.

There is plenty of information posted in this discussion on FlyerTalk, which I advise you read to learn more about this nefarious practice. Among other things, it includes valuable detailed information on how to disable dynamic currency conversion in specific countries.

Photograph ©2016 by Brian Cohen.

  1. I thought that if your card charges foreign transaction fees and you have a transaction outside your home country, then you’re charged a foreign transaction fee. It’s immaterial what currency you’re charged in, home or local currency, there’s still the fee. The key is the location of the transaction (foreign, not your home country), not whether you were charged in local or home country currency. I’m certain that was the result in the time or two that I fell for this scam and chose the wrong card. Did I get scammed twice?

    There’s really no reason to do dynamic currency conversion.

    1. I think you’re correct, if your card charges a 3% foreign currency conversion fee, and you opt for DCC, then you’ll end up paying both and be out around 10%.

  2. Agree that dynamic currency conversion is a total rip-off. The supposed advantage is “transparency” since you know what you’re paying in your home currency, but of course that transparency is of no real value since generally by that point you’ve already committed to making the purchase. And it comes at a cost of 5-6%. A few more things worth noting:

    1) This is increasingly common with cash withdrawals from ATMs as well. I recently saw this in Prague, and the difference was close to 10%. Outrageous.

    2) Often times you’re offered the choice by checking a box on the receipt. More than once I’ve checked the foreign currency but the merchant performed DCC anyway. So now I snap a picture of the receipt, showing clearly I chose to be billed in the local currency.

    3) Discover isn’t as rarely accepted outside the U.S. as you think. For example any place that takes Diners Club also takes Discover. I recently used my Discover card in Germany and the Czech Republic and tried to use it (without checking logos first) at five different establishments. Four out of five accepted it, which surprised me. I wouldn’t make it my only card of course (just as with AmEx), but the 5% rotating categories are great and I’m getting all cashback doubled at the end of the first year.

  3. To reiterate Brian’s point… charging in US Dollars does NOT avoid a foreign transaction fee. This fee is incurred whenever the charge is made through a foreign bank / processing agent irrespective of the currency.
    Dynamic Currency Conversion is never a good idea. I cannot think of any circumstances where you would be better off than using local currency.
    Hertz once pulled a fast one on me several years ago. I returned a car to Geneva Switzerland. On looking at the receipt I noticed that “for my convenience” they had converted the charge to US Dollars. I was never notified of this and as a Gold member have all my preferences (insurance, etc.) recorded with them, currency choice is not an option. Fortunately I had not left the airport so I returned to the Hertz counter and asked them to void the charge and redo it in Swiss Francs. I pointed out with a currency lookup on my iPhone that their rate was uncompetitive (5%). The agent told me that the credit card company would have charged me a conversion fee… but I replied that my card has no foreign fees. He claimed that he could not void and redo the charge. So I asked for a refund for the difference between what the market exchange rate was right then (per my iPhone lookup) and what they charged. To his credit he did do that. When I got back to the USA I wrote a strongly worded letter to Hertz Corporate complaining about this practice and have paid far closer attention with subsequent car rentals.

    1. I do not doubt you and Brian and I thank both of you for the clarification; but I was merely relating my experience — which is admittedly limited because charging for products or services while I am traveling in other countries and paying in United States dollars via a credit card is quite rare for me to do.

      As for your story with Hertz, David, I am reminded of this short article from July 6, 2010:

      Is that similar to what you experienced?

      1. Sounds similar but in my case the difference between their exchange rate and the “interbank” rate of the day was closer to 5% than 2.75%, and I ran into this in December 2012 some what later than your original report.

        By-the-way, here is the reply I got from Hertz… What I find remarkable about this reply is that they actually tell me I should have told them at the time I started the rental that I wanted to be “charged in the currency in which you were quoted.” Amazing… I was quoted a rate and currency and I have to tell them again to actually charge as quoted. Amazing. I did not follow up with them to point out how ridiculous that is.
        Dear Mr. Xxxx.

        We have received your inquiry regarding the currency conversion.

        In order to insure that you are being charged in the currency in which you
        were quoted, you have to advise the representative at the counter, at the
        beginning of the rental so that it can be noted on the contract.

        We appreciate the opportunity of clarifying this matter. Thank you for
        your business.


        name redacted.
        Customer Correspondence Administrator
        OKC Customer Services
        The Hertz Corporation
        P.O. Box 26120
        14501 Hertz Quail Springs Parkway
        Oklahoma City, OK 73134

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