Credit Cards

Beware- PayPal is doing fishy things with DCC

DCC is one of the most outrageous scams around that is somehow not illegal. TL;DR, for a “small fee” , you can now have the convenience of knowing upfront how much a foreign currency transaction will cost you in SGD instead of having to wait for your credit card statement to come to you.

Of course, the joke is that the “small fee” is larger than what your bank will charge you, and you always come out on the losing end. Want to know how much your bank will charge you? Look at the DCC-ed amount. Then imagine any amount less than that.

The truly insidious thing about DCC is that very often consumers are not given a choice. DCC is sneakily done by merchants looking to earn additional money off a transaction. I’ve seen this manifest itself in many ways- cashiers who don’t inform customers they have an option of currencies, a waitress in an Abu Dhabi hotel who mindlessly tapped the convert option on the payment machine without asking, the manager at a department store in Shanghai who tried to insist there was “no way of disabling DCC” …

Some enterprises even build DCC right into the system. Renting a car with Avis in the USA? Unless you write in, before your rental starts, you’ll be hit with DCC by default! See Avis’ half-assed sorry not sorry here-

We also apologize for the confusion regarding currency conversions.   If you use a credit or charge that is issued by a financial institution outside of the United States, the full amount of your charges will be converted to the card account’s billing currency by us unless you submit a written request in advance (prior to the pickup date and time) to have the currency conversion performed by your card issuer, or, specify at the time of pickup (prior to the contract being printed).

Unfortunately, it can not be done after the contract has been printed or at time of returning the vehicle. Our conversion will be based on a conversion rate published by Reuters and will incorporate a processing charge no higher than 4% applied to all amounts relating to this transaction. This charge will replace the currency conversion processing charge applied by your card issuer.

Uber in Singapore and Expedia also build DCC into their systems- the amount finally billed to your card will be slightly more than what you see in the official receipt.

(EDIT: As Jonathan pointed out in the comments, it’s not actually DCC for Uber, it’s the case of Uber billing in SGD but the transaction incurring a cross border fee because it’s billed out of the Netherlands. So it’s technically not DCC but somewhat tangentially related) 

Which brings me to PayPal. I recently needed to send USD 150 of funds to someone. I did everything as per normal. When the time came to select payment, the system defaulted to DCC. That in itself is annoying, because of the “tyranny of default”. I’m of the opinion that DCC should never be the default option- consumers need to consciously opt in to it.

For my USD 150 transaction, PayPal was offering me the princely rate of S$220.55, or US$1= S$1.470. The daily spot rate as per XE was S$1.427. This means a 3.1% spread.

Now, granted, I’ve seen way more aggressive spreads on DCC done elsewhere, but even if you went with your card issuer you’d be getting something slightly below that. HSBC, for example, charges a 2.5% fee on foreign transactions, plus some small spread on exchange rate differences.

No problem, I thought. I’ll just switch the currency over to SGD.

But no matter how many times I clicked “convert with card issuer”, I still got taken back to the same page with the DCC reflected.

I tried this five times. I logged off and in. I tried using incognito mode, thinking that my cookies might be messing with it. I tried using the PayPal app on my phone. No dice. No matter what I did, Paypal kept forcing me to use their DCC-ed rate.

I finally called up Customer service and was told this was a “known issue” and they were working on resolving it. Apparently this problem has been around for more than a week, and the timeline given for fixing it is a further 5-7 days.

Forgive me for being cynical, but part of me wonders how much an incentive Paypal has to fix this bug. Because the more days it remains unfixed, the more users will be conned into taking Paypal’s DCC-ed rates, and the more Paypal will earn.

The workaround customer service proposed was to change the default currency of my Singapore-issued card to USD.  This fixed the problem for me and I was able to send the funds in the end. But really, how difficult would it be for Paypal to do a small pop up or notification on their site informing users of the bug and the workaround? How many people have (1) just clicked through without looking carefully (2) tried changing it but gave up after many failed attempts.

If you’re using Paypal to make any foreign currency payments within  the next few weeks, please take note of this. You’ll need to spend an additional 10-15 minutes on the phone getting this fixed with Paypal, so budget that into your timelines.

Let’s see how long it takes them to fix this bug/feature.

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16 Comments on "Beware- PayPal is doing fishy things with DCC"

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Uber in Singapore and Expedia also build DCC into their systems- the amount finally billed to your card will be slightly more than what you see in the official receipt.

This is incorrect – uber singapore charge natively SGD which incurs cross border fee by some credit card banks.

I recalled that every new CC registered to PayPal will be automatically selected as SGD default. Has to make my way deep into their option to change to invoiced currency.

That explains why I was given the amount in SGD instead of invoice currency when I changed my credit card. Looks like PayPal is keen to boost their ‘other income’.

Two things:

AirBnB bills in the currency of the card. No way to change it.

Adding additional currency to PayPal account and selecting it as a default currency should do the trick.

True for AirBnB, but they are also charging you a 3% conversion fee (which is not clearly indicated) if the card is in a currency different from your host. I suppose the rationale for this is that AirBnB stills needs to transfer the money to the host and don’t want to bear the exchange rate fees itself.

You can trick Airbnb into accepting the currency of the host by changing your card’s issuing country in the accounts setting. I have done it twice this year, most recently about a month ago. AUD and JPY on an SG issued card. The payment processing server Airbnb uses does not verify the country.

The trouble with this is that if you cancel your booking, Airbnb will refund you in the foreign currency, and you have to bear the spread and fees both ways or persuade your credit card company to absorb them.

To change the default settings, Go to “Settings”, scroll down to “Payment settings”. Click on “Preapproved payments”, then click on “Set Available Funding Sources”. And near to card you need click “Conversion Options”. That’s all.

Thanks, this is what was needed to do the trick and change payment to the billing currency and thus without DCC

Are you perchance working on this from your phone? I had this same issue some time ago. I was only allowed to bypass DCC when I loaded PayPal up on my computer. This was quite a long time ago, so my issue may be a different one from yours.

hi aaron, where does one go to “change the default currency of my Singapore-issued card to USD”

i have looked through the whole paypal site and made changes to default account currency, changed default to bill as invoiced currency, but the payment page is still jumping to billing me in SGD whenever it ‘refreshes’

nvm. found out the only way is to call them. thanks anyway!

I found one workaround for Paypal. B/C nothing else worked. I followed Settings through Payments and Managing Preapproved Payments. The settings there for conversions had no effect on my transfer-to-family conversion (i.e. that suggestion by somebody else didn’t work for me), so I clicked on the ‘login to paypal’ link there. That suddenly took me to an old-layout looking page.. and I clicked transfer etc. etc. and yes, came to the old style payment page. As before it was updated to that new style I don’t like. Anyway, that old page had as default conversion via card, and everything was… Read more »
Just came across this issue making a payment from the US to a Japanese merchant. When I opted not to log in to my PayPal account to make the payment (because we all hate PayPal), it did not show any indication that it would charge the “PayPal conversion rate”, AKA dynamic currency conversion, but it charged it on my receipt anyway. I had the merchant refund the amount, and then I tried again, thinking I missed an option or link. Nope. PayPal on the phone said it was only possible to change it if I used a PayPal account to… Read more »
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