Dynamic Currency Conversion is, essentially, a scam. The credit card processing company gives you the “convenience” of knowing exactly what the charge will be in your home currency, but that convenience comes at a price, generally a few percentage points. And, almost universally, it is bad for the consumer. I just experienced the joy of DCC for the first time while purchasing a flight.
FlyBE is willing to “help” me as a customer and charge me in US Dollars for my ticket. And that “help” only costs me $6, or approximately 4.5% of the total purchase price. Even worse is that the DCC’d transactions generally do not avoid any foreign exchange transaction fees imposed on the consumer by the credit card issuer. Even though you are now paying in the currency of the card it is still a foreign transaction and still incurs the fee.
And, yet, I found the exception to prove the rule. Last month I was in Santiago, Chile for a couple days and spent a night at the Grand Hyatt Santiago. It was a cash & points booking (I’m pretty sure that matters) and so as I went to leave I asked to pay the cash balance in Chilean Pesos. The guy insisted pretty hard that I pay in US Dollars instead. And it seems he was correct in terms of saving me some cash.
The conversion rate is roughly correct for what the value should be, but I still managed to save ~$10 on the transaction. It seems that if he billed me in Chilean Pesos then the transaction would be subject to a 19% tax, but the bill in US Dollars is not hit with that fee. So even if it is a couple points higher on the DCC rate – and in this case I’m not convinced it really was – the savings by not paying the 19% tax still makes it a good idea.
Not that I had any idea going in to the transaction that the DCC would save me money, of course. But it turns out there’s always an exception to prove the rule. And, once again, I found it.
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