Dynamic currency conversion (DCC) is the offer, at a card terminal or ATM, to charge you in your home currency instead of the local currency. The rate in that offer is set by the merchant or ATM provider, and it contains a margin for the provider. Declining means the local-currency amount is charged, and your card network and issuer convert it instead.
Whether the offer costs you more depends on one measurable number: how far the offered rate sits above a reference rate for the same date.
What the offer changes
Without DCC, the terminal charges the local currency, for example yen. Your card network then converts that amount to your billing currency at the rate it applies when the transaction posts, and your issuer may add a foreign transaction fee on top. With DCC accepted, the conversion happens at the terminal, at the provider's rate, and the figure on the screen is the amount your card is charged. The question is which rate you are paying, and what the issuer adds on top of it. Two terminals can also offer different rates for the same bill, so measure each offer when it appears rather than relying on one you saw before.
Measuring the markup
A reference rate is a published exchange rate for a currency pair on a given date. BorderBasket takes its reference rates from Frankfurter, which aggregates central-bank and official reference data. It is a benchmark for comparison. No terminal or ATM is obliged to give you that rate, but it shows whether the offered rate is out of line.
To measure the markup, convert the bill twice: once at the reference rate and once at the offered rate. The difference, divided by the reference figure, is the markup as a percentage. Both rates must be for the same date, or the gap includes market movement that has nothing to do with the provider.
| Converted at the reference rate | 20,000 × 0.0065 = 130.00 USD |
|---|---|
| Converted at the offered DCC rate | 20,000 × 0.0068 = 136.00 USD |
| Markup in money | 136.00 − 130.00 = 6.00 USD |
| Markup as a percentage | 6.00 ÷ 130.00 = 4.6% |
The rates in this table are round illustrative numbers, not observed rates. Replace them with the reference rate for the date of your purchase and the rate printed on the terminal or ATM screen. Rates are quoted per unit of currency, so 0.0065 means 0.0065 US dollars for each yen. Check that direction before you multiply.
Compare with paying in local currency
A 4.6% markup is only the right comparison if you would otherwise receive the reference rate. You may not, because your card may add its own foreign transaction fee. Say your card charges 3% on foreign-currency purchases. That figure is an example, not a fee schedule, so check your card's terms.
| Reference conversion | 20,000 × 0.0065 = 130.00 |
|---|---|
| Card fee at 3% (example) | 130.00 × 0.03 = 3.90 |
| Local-currency route total | 130.00 + 3.90 = 133.90 |
| Offered DCC total | 136.00, which is 2.10 more than 133.90 |
This comparison assumes the card network converts at the same reference rate, which it may not do on the day your transaction posts. Treat it as a method, and use the amounts on your statement to check the real result. If the network rate is higher than the reference rate, the local-currency route costs more than shown here.
Accepting DCC is not always the worse choice. If the offered total came out below your local-currency total, accepting would cost less. The test is the same either way: compare the total you will be charged under each option, with the card fee included, and pick the lower one.
Declining, and what the receipt should show
At a terminal, the prompt generally offers two choices: the local currency or your home currency. Choose the local currency to decline. Read the prompt before you tap or sign, because the choice sets the currency of the charge. If the wording is unclear, ask the cashier which option keeps the local currency.
Look for three things on the receipt: the local-currency amount, the converted home-currency amount, and the rate applied. If the rate is missing, you cannot measure the markup from the receipt, and that is a reason to decline. Keep the receipt with your card statement, and compare the charged amount with the figure you worked out before you left.
The ATM version
An ATM offer works the same way. The screen asks whether to withdraw in local currency or in your home currency, and the home-currency option carries the provider's rate. Decline it and select the local currency. The card network and issuer then convert the withdrawal, and any foreign transaction fee on your card applies on top.
Run the same arithmetic. Multiply the withdrawal by the rate on the screen, multiply it by a reference rate for the same date, and compare the two. If the screen shows no rate, you cannot measure the offer. Decline it, and check the converted amount and any fees on your statement afterwards.
Before you accept or decline
- Get the rate, not just the total. An offer can look convenient and still carry a wide margin.
- Look up a reference rate for the same date and convert the bill yourself, so you know the benchmark before you are standing at the terminal.
- Add your card's foreign transaction fee to the local-currency route, using the figure in your card's fee schedule.
- The currency converter takes a dated reference rate, adds a card fee you enter, and compares a DCC offer against both.
Once you know the home-currency total you would pay, the full landed-cost calculator places it beside the home price, so the currency choice becomes one line in a complete figure.
Two related guides cover what this one leaves out. Foreign transaction fees explains how the card percentage works on purchases and refunds, and reference rate vs card rate sets out which rate each party uses.