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Why You Should Avoid Dynamic Currency Conversion [2023]

Christine Krzyszton's image
Christine Krzyszton
Christine Krzyszton's image

Christine Krzyszton

Senior Finance Contributor

311 Published Articles

Countries Visited: 98U.S. States Visited: 45

Christine ran her own business developing and managing insurance and financial services. This stoked a passion for points and miles and she now has over 2 dozen credit cards and creates in-depth, deta...
Edited by: Jessica Merritt
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Jessica Merritt

Editor & Content Contributor

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A long-time points and miles student, Jessica is the former Personal Finance Managing Editor at U.S. News and World Report and is passionate about helping consumers fund their travels for as little ca...
& Keri Stooksbury
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Keri Stooksbury


35 Published Articles 3230 Edited Articles

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With years of experience in corporate marketing and as the executive director of the American Chamber of Commerce in Qatar, Keri is now editor-in-chief at UP, overseeing daily content operations and r...

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Your bags are packed and you’re off on that international vacation you’ve been planning for months. Chances are, the last thing on your mind is how you’ll lose money during your travels by falling victim to dynamic currency conversion.

The truth is that it happens all the time. You’re presented with your restaurant bill in a foreign country and the total is already calculated in U.S. dollars. You do the quick math, determine the total seems close, you sign, and you’re on your way. Unfortunately, you’ve just been the victim of dynamic currency conversion, and it can cost you.

But there is a simple solution to avoid this situation. Here’s all the information you need to know about dynamic currency conversion and how you can avoid it for good.

What Is Dynamic Currency Conversion?

When traveling abroad, dynamic currency conversion (DCC) uses your home currency to pay for a purchase in a foreign country instead of the local currency. However, you could also be in the U.S. and make an online foreign purchase on eBay, Etsy, or another foreign website, or use PayPal to pay for a foreign purchase, and experience DCC.

To help you understand DCC, let’s start with how a point-of-sale credit card transaction processes without it. You’re handed your restaurant bill while in Mexico and it’s calculated in Mexican pesos. You use your credit card to pay the bill, your credit card payment processor converts the pesos to U.S. dollars at its current exchange rate, and your card is charged in U.S. dollars.

With DCC, things work differently. The bill may be brought to you in U.S. dollars or the bill may have the option to check off whether you want to pay in U.S. dollars or Mexico pesos. You’re not sure of the conversion rate, but you are fine with the U.S. dollar amount listed., so you pay in U.S. dollars and you’re done.

Here’s the problem: when you selected to pay in U.S. dollars, you agreed to have the merchant exchange those dollars into local currency at their chosen (usually unfavorable) rate so they can be paid in local currency. There may even be additional fees added in. Then, once the merchant (or their payment processor) has exchanged the amount into Mexican pesos, your credit card payment processor has to then change the pesos back into U.S. dollars to bill you.

Confusing? Let’s look at an example.

An Example of Dynamic Currency Conversion

Man in Coffee Shop
DCC may not matter much on a coffee purchase, but larger purchases can be inflated greatly using DCC. Image Credit: Lisa Fotios via Pexels

You’re checking out of your hotel in Mexico and when your bill is presented, it is calculated in both Mexican pesos and U.S. dollars. You are asked to select which currency you prefer to use.

  • Bill in Mexican pesos: Mex$2,000
  • Bill in U.S. dollars: $126

You’re rushed, you need to leave for the airport, and $126 appears correct, so you select U.S. dollars.

Let’s assume at today’s exchange rate, calculated by your credit card company, Mex$2,000 is the equivalent of about $106. The U.S. dollar selection is a dynamic currency conversion that would cost you $20 more than if you had selected the local currency — nearly 19% more! Your card will be billed $126.

The hotel, or its payment processor, used its own (unfavorable) exchange rate and fees were added. Imagine the additional cost of DCC when your hotel bill is thousands of dollars!

We know DCC can cost you more, but let’s continue and look closer at the process and how you can avoid it.

Hot Tip: When traveling abroad, always use a credit card that does not charge foreign transaction fees. The combination of being hit with dynamic currency conversion plus the addition of foreign transaction fees can add significant costs to your purchases. 

Pros and Cons of Dynamic Currency Conversion

While DCC may add costs to your transactions, there are some positive aspects of selecting DCC and paying with U.S. dollars:

  • You’ll Know the Price You’re Paying — When you select DCC, you’ll know the price you’re paying for an item or service. You don’t need to calculate the exchange rate or guess. It can also be easier to budget your expenses when you know what you’ve spent in U.S. dollars.
  • The Price Is Locked In — Unlike paying in local currency, the DCC price is locked in. You don’t have to wait to look at your credit card statement to know the exact amount of the purchase.

Unfortunately, the downsides far outweigh any positives of the practice:

  • You’ll Pay More — DCC adds cost to your purchase in the form of unfavorable exchange rates and additional fees.
  • Foreign Transaction Fees — Even in your own currency, you could still be hit with additional foreign transaction fees on top of the cost of DCC. Always use a card that does not charge these fees.

Bottom Line: With DCC, the price you pay will be obvious and it will be locked in. Unfortunately, these conveniences come at the price of paying more for your purchase. 

How To Avoid Dynamic Currency Conversion

Person Using ATM
Beware of foreign ATMs that ask you to select an option to “lock in” the U.S. dollar amount you’ll be charged. Image Credit: Giovanni Gagliardi via Unsplash

Dynamic currency conversion can occur anywhere — at retail stores, restaurants, hotels, transportation providers, ATMs, sending money abroad, and more.

Here are some steps for avoiding this practice:

Be on the Lookout for Dynamic Currency Conversion

The first step to avoiding this practice is to know how to spot it.

It’s very difficult to dispute dynamic currency conversion once you’ve signed and agreed to be charged. For this reason, you’ll want to review every bill and always make sure the total is stated in local currency.

Watch for DCC at ATMs and with payment processing services as well. ATMs frequently ask if you want to be charged in U.S. dollars. Payment processors, such as PayPal, may apply their own conversion rates on foreign transactions that can be less favorable than your bank using their daily conversion rate.

Anytime you are making a foreign transaction always watch for DCC and select to execute the transaction in local currency to ensure you don’t pay more than you need to.

Ask for a Corrected Bill

If you’re presented with a bill that’s already in U.S. dollars, ask for it to be voided and request a new bill calculated in local currency. Do not sign anything until you’re certain the bill is in local currency. Circle the amount on the receipt so there is no question about what should be charged.

Don’t Pay in Cash With U.S. Dollars

You won’t avoid DCC by paying in cash with U.S. dollars, as the same unfavorable exchange rate and fees still apply. In our hotel bill example above, if you paid in cash with U.S. dollars, you would still be paying the inflated $126 versus the equivalent of $106 when paying in Mexican pesos.

Review Your Credit Card Statement

Hold on to your receipts and match them with your credit card statement. If you are charged incorrectly and the amount is significant, you can dispute the charge and use your receipt as proof of the correct transaction.

Know the Currency Conversion Rate of the Country You’re Visiting

Whether you download a currency conversion app to your phone (we recommend XE Currency), make notes, or just memorize the approximate conversion rate, it’s imperative to know this information in advance.

Hot Tip: If your bill is calculated in local currency, but there is a box that is checked that says convert to U.S. dollars, ask for another bill. A merchant may have checked the U.S. dollar box for you!

Final Thoughts

It can be tempting to pay a bill in a currency you’re familiar with, like U.S. dollars. Unfortunately, you’ll pay more with dynamic currency conversion.

The good news is that you do have a choice and DCC can be avoided. Review your bills carefully, always select to pay in local currency, and use a credit card that does not charge foreign transaction fees for even greater savings.

Frequently Asked Questions

Is dynamic currency conversion better?

Dynamic currency conversion will cost more than paying for your purchase in local currency whether you’re using a credit card or cash.

The positives of dynamic currency are that you will know the amount you’re paying in U.S. dollars upfront and that amount is locked in.

The negative is that the amount calculated may be executed with an unfavorable exchange rate and fees will be added in.

What is dynamic currency conversion?

Dynamic currency conversion is an option given at the point of sale on foreign transactions to pay in your home country’s currency.

For example, your restaurant bill in Mexico may be calculated in both pesos and U.S. dollars. The U.S. dollar option may be dynamic currency conversion calculated using an unfavorable exchange rate and there may be fees added.

Is it cheaper to use a credit card or cash abroad?

In most cases, paying with a credit card that does not charge foreign transaction fees will be the most convenient method of payment in countries where cards are widely accepted.

In countries where cash is still a prominent method of payment, you can obtain local currency from an ATM on arrival.

Both can be equally economical, but with credit cards, you do not have to carry a large amount of cash on you.

In some cases, paying with cash may allow you to bargain for certain goods and services as the provider does not have to pay credit card transaction fees.

What is cardholder preferred currency?

Cardholder preferred currency (CPC) is another name for dynamic currency conversion (DCC).

The term is used because the process (CPC or DCC) allows the cardholder to see the amount they will pay for a foreign transaction in their home currency.

Christine Krzyszton's image

About Christine Krzyszton

Christine ran her own business developing and managing insurance and financial services. This stoked a passion for points and miles and she now has over 2 dozen credit cards and creates in-depth, detailed content for UP.


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