The Idea

• DCC is a service offered on Visa/Mastercard payments overseas that bills the customer in his home currency, while tacking on a conversion fee that can be as high as 8%
• Although in theory you have the right to reject DCC, in practice a lot of customers never get asked by the merchant. This is against the T&C of Visa/Mastercard, but still happens very often
• Be extremely vigilant when using your Visa/Mastercard overseas, or use AMEX. If given a charge slip with DCC, deface the merchant’s copy and write “DCC rejected” on both your copy and the merchant’s to support a dispute if necessary
• Read the wiki on Flyertalk to get educated on this scam- don’t fall prey to it!

The Details

Dynamic Currency Conversion (DCC) is a scam and needs to be stopped.

The underlying idea behind DCC is that it gives you the “convenience” of knowing in advance how much your credit card will be billed when you pay in a foreign currency. Suppose I’m shopping in the USA and I want to charge US$100 to my card. If the merchant has a DCC terminal installed, an option will appear asking me whether I’d like to DCC the transaction and pay S$145.10, for example.

“What a great convenience!” said no one, ever. “What’s the catch?” Well, US$10 is about S$134.20 at today’s exchange rates. Even if you paid using your credit card and incurred a 3.5% forex fee, you’d be paying at most S$138.90, maybe even S$140 at most once you factor in all the markups.

You’ll notice that S$145.10 is much higher than S$134.20. That’s right. DCC is sold to merchants as a way for them to generate extra revenue- this additional spread (as high as 8% potentially) earned through DCC is shared between them and the payment processor. The DCC playbook even gives clerks lines to encourage customers to accept DCC, such as

• “Oh, it’s more convenient for you because you know how much you’ll be paying”
• “Oh, it’s better than being hit with some unknown exchange rate when you get your bill”
• “Oh, I think you look stupid enough to fall for this”

There’s a long Flyertalk thread on this and it appears that even the sales staff in a lot of places are ignorant as to what DCC is- either telling the customer they “have no choice but to use DCC” or that the DCC-ed rate is “just for their convenience and they will be charged in their home currency”

“Ok,” you say “No problem, I’ll just opt not to use it”.  That’s great, but every time I’ve been hit by DCC I’ve explicitly requested not to use it, or not been given the option.

For example, Avis will automatically DCC your transaction if you pay with a Visa or Mastercard. Nowhere in the payment process does it give you the option to opt out of DCC. To opt out, you have to physically visit a billing counter before you begin your rental and ask them to process your transaction manually

Another time, I was at a restaurant in Shanghai (DCC is particularly rampant in China) and saw on my credit card charge slip the DCC option. Despite ticking CNY, I was still billed in SGD when I got my statement. Because of this, I’m extra vigilant about any credit card slip I sign overseas.

What’s funny is that Banks, who are losing out due to DCC (they don’t get to impose their forex markup), are taking steps to negate whatever advantage might have existed from DCC by levying a surcharge for SGD denominated transactions done outside of Singapore (ie DCC-ed transactions)

So how do you avoid this scam? My suggestions

• Wherever possible, pay with AMEX. AMEX does not support DCC
• When given a credit card chargeslip with two boxes to tick (SGD vs local currency), mark local currency very clearly and write on the receipt “DCC rejected, Local option selected”. Make this marking on both your copy and the merchant’s in case you need to file a dispute
• When the staff say that they are “unable to change the charge” or “the system forces them to use DCC”, they’re ill-informed or lying. Don’t take it personally, just deface the merchant’s copy of the chargeslip as mentioned above. During a dispute, Mastercard/Visa will ask the merchant to submit a copy of the chargeslip- where there’ll be your clearly written statement saying you rejected DCC

I strongly urge you to read the wiki over on Flyertalk which explains DCC in more detail and gives sample charge slips displaying DCC so you know what to look out for.

What bugs me the most about DCC is how cynical it is, purporting to confer a non-existent benefit on the customer. Hopefully you’re not better placed to protect yourself. Because The More You Know…

Of course DCC can be useful to you. Just look at the converted amount on your receipt. Then cancel it out and know that whatever amount you end up paying, it’ll be lower than the converted amount.