Tourists Hit with Hidden Credit Card Fees

A recent family vacation through France, Spain, and Portugal highlighted a new tourist trap that could have cost hundreds of dollars, related to a practice known as Dynamic Currency Conversion, or DCC. This trap puts credit card users at risk of losing money with every purchase.

Here’s how DCC works: when making a purchase with a credit card in a foreign country, the terminal offers the option to pay in U.S. dollars (USD) or the local currency, such as Euros. Paying in USD may seem like a good idea, but it’s not, due to the bad exchange rate offered by the terminal.

Visa notes that this could add an additional 3–5% markup through inflated exchange rates. In contrast, choosing to pay in local currency allows the card network and issuing bank to handle the conversion, usually at a more favorable rate.

This is why it’s generally best to choose to pay in the local currency. For example, a 100 Euro dinner bill could turn into a roughly $110 charge, but selecting to pay in USD could make it over $115, not counting any foreign transaction fees.

The DCC trap has recently evolved, increasing the chances of falling victim to it. Now, in many shops and restaurants, after choosing to pay in a local currency, the terminal sends you to a second screen asking to confirm if you accept or reject the conversion.

Richard Quest, a business correspondent, explains that if you push “accept,” you’ve fallen into the trap. Most service personnel encourage rejecting the conversion on the second screen, and some will even press “reject conversion” for you, showing you what they’re doing to ensure you’re okay with it.

The problem of DCC isn’t limited to Europe, but is present and growing in other tourist cities around Asia, Latin America, and other parts of the world. Although the new “second screen” trap hasn’t been reported in these countries, it’s possible it’s already global.

Having lived and traveled extensively around Europe, it’s clear that DCC seems to be especially aggressive here. To avoid falling victim to the DCC trap, always choose to pay in local currency and choose to “reject conversion.”

By doing so, you’ll generally be choosing the most favorable currency conversion rate and potentially save yourself a lot of money in the process.

In the middle of a trip, it’s easy to get caught up in the excitement of exploring a new place. Taking a moment to understand the DCC trap can make a big difference in the end.

With this knowledge, you can make informed decisions about your payments and avoid losing money to inflated exchange rates.