We all (should) know by now that Dynamic Currency Conversion (DCC) is a scam. The payment processor does you the “service” of displaying a converted rate for your purchase on the screen while the consumer typically pays 3.5% for that luxury. During my recent trip to London I, of course, was presented with the DCC option several times. Thanks to the European style of CC processing, where the customer handles the terminal, I got to see the extra confirmation prompt that I was really declining the fee (there is no extra prompt confirming that you want to pay if you hit the wrong button). I also got to see just how dynamic the pricing is.
While picking up lunch one afternoon I actually hit the USD button instead of the GBP button. I know, amateur move. But because it is chip+signature I managed to pull the card out before the transaction completed and void the sale. When the clerk ran the payment the second time I chose correctly. But I also got to see the quoted conversion rate twice. And it changed.
While the credit card company generally has a single daily rate for conversions it seems that the payment processor is more flexible in the numbers. The 0.7% swing is also pretty steep for two swipes a minute apart, especially when the real world USD:GBP conversion rate is far more stable than that, disastrous election result days not withstanding.
Even more interesting in this case is that the “base” exchange rate that the DCC fee gets added to is not the same rate that Visa ultimately used to complete the transaction. For transactions on Friday the official Visa rate was 1 GBP = 1.311769 USD. The transaction posted to my account at 1.311667 based on rounding the last penny. The two rates quoted, with the 3.5% DCC fee backed out, are 1.330099 and 1.335699. In this case the DCC transaction was a double dip in terms of just how badly they wanted to screw consumers. The 3.5% DCC fee ended up above 5% with the bad starting conversion rate.
Also, while MasterCard typically is known to offer a better conversion rate than Visa that was not the case on this particular day and with these currencies. Had I used my Barclay’s Arrival+ card (the main MC-issued one I carry) the rate would’ve been worse than the Chase Sapphire Reserve Visa I did use.
Moral of the story: DCC is still a scam (except when it isn’t) and probably an even more variable scam than I’d previously considered.
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