I just returned from a family vacation through France, Spain, and Portugal, and we had an amazing time. However, I couldn’t help but notice a new tourist trap that could have potentially cost me hundreds of dollars.
The trap has to do with a practice known as Dynamic Currency Conversion, or DCC. Because of it, you’re at risk of losing money every single time you pay with a credit card—which, for most people nowadays, is almost always. And recently, it seems DCC has evolved to make it even easier to fall victim to the trap.
First, here’s how DCC works in case you’re unaware: Let’s say you’re visiting Italy, Spain, or Portugal and you decide to make a purchase with your credit card. The terminal offers you an option: You can pay in U.S. dollars (USD), or you can pay in the local currency (in this case, euros).
For the uninformed, it may seem like a good idea to pay in USD. But it’s absolutely not, because the exchange rate offered by the terminal is usually bad. Very bad. According to Visa, this could add an additional 3% to 5% markup through inflated exchange rates.
In contrast, choosing to pay in local currency (like euros if you’re traveling in Europe) allows your card network and issuing bank to handle the conversion, usually at a more favorable rate to you (although credit card companies and their rates vary, so you should always double-check). This is why, under normal circumstances and all things considered equal, you should always choose to pay in the local currency.
To illustrate, imagine you go out for a nice dinner and you get the bill, which is 100 euros. Depending on the exchange rate, selecting to pay in USD could turn a roughly $110 charge into more than $115, not counting any foreign transaction fees your own card may be charging you.
But as mentioned, there’s now more to the story. The DCC trap seems to have recently evolved, increasing the chances you fall victim to it.
Now, in many shops and restaurants, after you’ve chosen to pay in a local currency like euros, the terminal then sends you to a second screen asking you to confirm if you accept or reject the conversion. As CNN business correspondent Richard Quest recently pointed out in a thread on X, if you push “accept,” you’ve fallen into the trap.
“You have accepted the thing you wanted to reject,” Quest explains. “[The] cashier has told me most shoppers (myself included) are falling for this. It’s wrong, wrong, wrong.”
To be clear, most of the service personnel I dealt with on our trip encouraged me to reject the conversion on that second screen. In fact, I’d often choose to pay in euros, forget about the second screen, and hand the terminal back to the cashier. At that point, they’d press “reject conversion” for me, at the same time showing me what they were doing to make sure I was okay with it.
The problem of DCC isn’t limited to Europe. It’s present and growing in other tourist cities around Asia, Latin America, and other parts of the world. I haven’t heard of this new “second screen” trap in any of those countries, but I wouldn’t be surprised if it’s already global. Having lived and traveled extensively around Europe for years, though, I’ve noticed DCC seems to be especially aggressive there.
How to avoid the trap
Remember, to avoid falling victim to the DCC trap, make sure to always:
- Choose to pay in local currency.
- Choose to “reject conversion.”
In doing so, you’ll generally be choosing the most favorable currency conversion rate and potentially saving yourself a lot of money in the process.
—By Justin Bariso
This article originally appeared on Fast Company’s sister website, Inc.com.
Inc. is the voice of the American entrepreneur. We inspire, inform, and document the most fascinating people in business: the risk-takers, the innovators, and the ultra-driven go-getters that represent the most dynamic force in the American economy.
