How to Avoid Dynamic Currency Conversion When you Travel
Credit cards are the most convenient way to pay for your goods and services when you are traveling and do not want to deal with different currencies. What’s more, it is a method for people to gain more miles for each dollar. Sometimes, you might even notice that credit card transactions will display the currency of the country you are in along with SGD. If you decide to pay in SGD, you would have been scammed by the local merchants in what we call, dynamic currency conversion. Dynamic Currency Conversion, or DCC for short, is a service that overseas merchants employ to automatically change amounts paid through credit card into Singapore Dollars for you. This is why you will get the option of choosing to pay in your preferred currency. However, when you choose to pay in SGD, the transaction will be converted based on the merchant’s conversion rate; which is arguably higher. This is compared to paying in the local currency where your bank will decide on the conversion rate. As such, it is way more reliable to just pay in the local currency whenever you swipe your credit card. If you are curious and want to find out more about DCC, especially if you have unknowingly chosen SGD more than once when you are traveling, read on as we list and explain everything you need to know about DCC.
Why is DCC Bad?
1. You End Up Paying More with DCC
If you think that your bank exchange rates are high, DCC can be twice as much. It might be easy and tempting to pay in SGD when you see it reflected on the transaction; after all, it makes it simpler for you to gauge how much you are actually spending, but at the end of the day, you could be paying a few hundred dollars more. This holds true for large hotel bills; in the UK, travelers lose an estimated 1 million GBP on a daily basis because of DCC. There are no official figures for Singapore but you can clearly see the negative impacts of DCC as the merchants receive monetary rewards from the higher exchange rates they charge.
2. You Actually Get Less Credit Card Points Using DCC
Another reason why people like using credit cards to pay for their travel expenses is because of the credit card points, or miles that they get to earn. Swiping your card while traveling enables you to earn more than when you swipe your card in Singapore. For instance, for a UOB Visa Signature card, you will get to earn 4mpd when you spend foreign currency; compared to 1.2mpd when you spend SGD. Thus, when you opt for DCC, you pay more and lose out on gaining more miles as well.
3. You Do Have to Pay Fees for Using DCC
Seeing the final amount reflected on the transaction is not the actual amount you’ll end up paying. While it does give you that idea, your bank will charge additional processing fees for DCC transactions; so you end up spending more on top of what you have already spent because of DCC. If you check your bank statement at the end of the month, you will find out that you have been charged a DCC fee of around 1% depending on the bank. Considering the amount of money you spend while overseas on DCC transactions, 1% can amount to a significant sum of money.
How Do I Avoid DCC?
1. Be Alert
As overseas merchants stand to reap higher profits when customers choose DCC, some of them will alter their payment kiosks to directly choose DCC for transactions every time or make their cashiers choose the option for customers. It is worthy to note that customers’ consent is needed before DCC can be used so you do have a right to reject and choose which currency you would like to pay in. In the event that you notice your merchant charging you in SGD without your permission, you should not go ahead with the transaction and clarify that you are paying in the foreign currency to avoid getting scammed.
2. Be Aware of Your Rights
As mentioned, you have a right to choose DCC transactions so do not be afraid to question the merchant and refuse to pay. The rule is stated on Visa and Mastercard compliance guides so there is no doubt about its legitimacy. There will be merchants out there who will try to convince you that it is a computer-generated system that cannot be changed, but it is just their way of scamming you.
3. Dispute the Transaction
If you tried to avoid DCC but got forced by the merchant to go through with the transaction, be firm in asking him to undo it and do not sign the charge slip. Instead, write “DCC rejected and choice of local currency not offered”. If it is a payment kiosk, take note of all the details so that you can call your bank and dispute the transaction. Your bank will usually start an investigation and sometimes, they might credit the money back into your account; even if it is not from the merchant itself. If there are sufficient complaints against the merchant, the relevant authorities may take action.
4. Use American Express Cards
The fool-proof way to travel in ease and steer clear of DCCs at all costs is by owning an AMEX card like the AMEX KrisFlyer Ascend or AMEX KrisFlyer Credit Card. This is as none of these cards support DCC, so you won’t even have the option of selecting DCC, and you won’t be unknowingly charged as such too.
Regardless of where you travel to, DCC is prevalent in many shops; even seemingly harmless ones in first world countries are known for DCC transactions. Merchants will do anything to increase their profits and the onus is on you to be alert and aware of your surroundings. Take note of every transaction you make so that you will never fall into the trap of making a DCC transaction. Keep yourself educated and let the people around you know so that everyone can have a better, and safer, traveling experience.
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