Article: Why is Dynamic Currency Conversion Even Legal?

[SYD]

That's not right either. I don't want to be presented with that choice each time I make a purchase. I have to keep telling them to charge in THB and when wife is around they confirm with her that I dont want to be charged in AUD.

If they are really providing a service then it should be switched off as a default and if you want this service to switch it on. Same as international roaming. Ours is switched off by default.

I would prefer the option to opt out at the card level so it never pops up.

I can’t imagine a single scenario where I would be better off using DCC.

Fortunately it’s getting more coverage in the mainstream media and hopefully that helps promote the illegitimate nature of DCC. Another article just today!

“The dynamic currency conversion trap”

Fees and scams: Eight things to know about using credit cards overseas

Scammers lie in wait, and if you use the wrong card you could end up paying more than you need to.

www.smh.com.au

 

[TheRealTMA]

The merchant does get a kick back (to encourage them to enable the system) but yes, the DCC service provider takes the biggest cut. AFAIK, actually not the foreign bank, but a 3rd party “service provider” the payment is routed through. A bit like PayPal etc.

Not necessarily. I believe it’s turned on by default and the merchant has to opt out - if they even know how to.

It’s a junk “service” that should be avoided. Defending it as some how the merchants right gives it some form of credibility. Which is doesn’t deserve.

Yes. Visa Merchant rules. Merchant gets a cut/ fee for promoting DCC.

"Dynamic Currency Conversion (DCC)* occurs when the merchant converts the purchase amountfrom the merchant’s currency to another currency, typically the cardholder’s billing currency. Ideallythe merchant will use a file provided by Visa to their acquirer that enables the merchant to identify thecorrect cardholder billing currency in which to offer DCC. The merchant submits the transaction forprocessing in the converted currency, and typically charges a fee or mark up on the foreign exchangerate.Cardholders offered DCC may appreciate the increased transparency as they can see the transactionamount at the time of sale in both the merchant’s and their own currency, as well as the exchangerate and any mark-up added, and can then make an informed choice"

"Merchants must disclose theirpayment location toconsumers as part of the merchant website requirements.

DCC disclosures mustoccur at the time the DCCofer is made and beforethe cardholder is asked to actively choose thetransaction currency.If the cardholderactively chooses DCC,the transaction receipt must include the same disclosures previously provided to th e cardholder in additionto all other required DCC information."

https://usa.visa.com/dam/VCOM/download/merchants/VBS-01-AUG-14-Optimize-Cross-Border-Ecommerce.pdf

Mastercard Rules
"3.7 CARDHOLDER CHARGEBACK RIGHTS If a cardholder complains that they were not given a currency choice for a DCC transaction, or DCC was otherwise performed incorrectly, the issuer has a chargeback right against the acquirer. "

https://www.mastercard.us/content/dam/public/mastercardcom/na/global-site/documents/dynamic-currency-conversion-may-2021.pdf

 

[grandir]

Yes. Visa Merchant rules. Merchant gets a cut/ fee for promoting DCC.

Not necessarily - the asterix in the Visa rules state:

*DCC is a merchant-ofered currency conversion service that is provided by acquirers (or DCC agents). It is not a Visa service.

In other words, DCC is essentially the merchant on-selling the service which is actually provided by the foreign bank/payment processor. Kind of like how car hire companies on-sell insurance when you rent a car with them.

So it all depends on whether the additional markup resulting from DCC actually contains anything for the merchant. The markup will definitely include the cost to the acquirer for providing the service to both the card-holder and to the merchant e.g. converting EUR to AUD and then converting AUD back to EUR.

 

[SYD]

Not necessarily - the asterix in the Visa rules state:

*DCC is a merchant-ofered currency conversion service that is provided by acquirers (or DCC agents). It is not a Visa service.

In other words, DCC is essentially the merchant on-selling the service which is actually provided by the foreign bank/payment processor. Kind of like how car hire companies on-sell insurance when you rent a car with them.

So it all depends on whether the additional markup resulting from DCC actually contains anything for the merchant. The markup will definitely include the cost to the acquirer for providing the service to both the card-holder and to the merchant e.g. converting EUR to AUD and then converting AUD back to EUR.

As mentioned up thread. The POS service providers offer DCC to merchants as:

• Additional revenue: Businesses earn commissions or fees from DCC transactions, providing an extra revenue stream

What is dynamic currency conversion? | Stripe

Here's a guide to dynamic currency conversion, including how it works, how to handle it and how Stripe can help.

stripe.com

 

[LondonAussie]

I would prefer the option to opt out at the card level so it never pops up.

I can’t imagine a single scenario where I would be better off using DCC.

Fortunately it’s getting more coverage in the mainstream media and hopefully that helps promote the illegitimate nature of DCC. Another article just today!

“The dynamic currency conversion trap”

Fees and scams: Eight things to know about using credit cards overseas

Scammers lie in wait, and if you use the wrong card you could end up paying more than you need to.

www.smh.com.au

It's really well known in Europe as a bank scam too. In almost all places I've been recently I've noticed the staff automatically selecting EUR on their POS terminal when setting up the payment, without asking.

 

[moa999]

Always pre-empt. Say charge in EUR.. or whatever other local currency.

 

[Rayesfeg]

I recently experienced similar on JetStar's website.
One way Flex Plus booking from Hamilton, New Zealand to Sydney (great new route - saves so much hassle traveling to/from Auckland). The fare was:

• $397 NZD or,
• $397.48 AUD

Yes, the AUD amount was more than the NZD amount. Given the currency conversion between the 2, the AUD equivalent should be less than the NZD.
To Jetstar's credit they have displayed the exchange rate which is some degree of transparency I suppose.

Chose to pay in AUD on my Credit Card which ended up converting to $386.75 , that included the credit card surcharge that Jetstar pass on to customers. Had I chosen Jetstar's rate I would have paid over $10 more. Not a significant amount of money but for a more expensive/longer route this different would be greater.

NZD:


AUD converted at Jetstar's rate:

 

[Beano]

I think this has gone beyond the original question of " Why is Dynamic Currency Conversion Even Legal". Off course it is legal, and always will be. Visa was fined several thousands for trying to stop it.

We are now into the issues surrounding the use of dynamic conversion and the traps that people need to be ware of.

​

 

[CaptJCool]

Qantas tried the same delight




And then was added a CC surcharge anyway


What the XE rate was




What the final figure
(My worry was my CC coy would see it as a foreign merchant and charge 3.5% anyway)
What the final figure was


So saved $5