Dynamic Currency Conversion - merchant offering currency conversion

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Dynamic Currency Conversion - merchant offering currency conversion

Post by Peculiar_Investor » 12 Oct 2012 08:54

The discussion here seems worthy of it's own topic. It even has a name, Dynamic currency conversion - Wikipedia.

I also found an interesting blog on the topic, Dynamic Currency Conversion: Still A Scam - Jeanne Leblanc | Coach Class, which provides a link to VISA's (USA) FAQ on the issue.

So I checked the VISA Canada version which states,
VISA Canada wrote:If you do not want to use DCC when making a purchase, then you have the right to refuse the offer and have your transaction billed in the merchant's local currency, which will then use Visa's conversion rate. If you did not agree to DCC, but see it on your bill, then you should ask your issuing bank to contest the charge.
The bottom line seems to be general agreement that it is a scam and you do have the right to decline, although it would seem that merchants do not make it easy and count on those looking for convenience over cost.
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Re: Dynamic Currency Conversion

Post by Bylo Selhi » 12 Oct 2012 12:27

Commenter in blog wrote:As one of the four concessionaires selling chocolate at Schiphol Airport, I have read your article about our DCC service. We have started this service almost a year ago and up till now we have seen that our customers appreciate this service. For it gives them complete certainty about the amount charged on their credit card.
[my bold] What self-serving, disingenuous bullshit! Major currencies rarely fluctuate more than 50bp in a day, so it's hardly a "convenience" to pay 4% to be "protected" from a few tenths of a percent fluctuation between the time they buy and the time the transaction gets posted to their card. Besides, these fluctuations go both ways, so about half the time the FX rate becomes more favourable to the consumer during that period.
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Re: Dynamic Currency Conversion

Post by kcowan » 12 Oct 2012 17:05

I would think the blog commentator really meant it. That is somewhat the problem we are facing with the population in general. They would trade off a slightly higher price for knowing what the amount will be. They do not understand the nuts and bolts of the transaction.
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Re: Travel/Vacations

Post by tedster » 16 Feb 2017 05:01

I know this has been discussed somewhere I the forum, but I forget where. :oops: Anyhow I am in Penang and just did my first purchase of groceries. The cashier asked me if I wanted to be charged in Ringits or Cdn $. I said ringits. However, others have discussed this before and can they remind w=me which is the better choice?
Last edited by Peculiar_Investor on 16 Feb 2017 20:34, edited 1 time in total.
Reason: Found the place where it had previously been discussed. Moved posts

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Re: Travel/Vacations

Post by Peculiar_Investor » 16 Feb 2017 07:21

You made the right choice. Who do you think will give you a better exchange rate, the merchant or your bank? Your bank at least has to be somewhat competitive and deals with foreign exchange in high volume. I doubt the merchant has that scale.
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Re: Travel/Vacations

Post by tedster » 16 Feb 2017 09:01

Not certain I mentioned, I was using VISA. Bank is involved either way.

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Re: Travel/Vacations

Post by Peculiar_Investor » 16 Feb 2017 09:17

tedster wrote:Not certain I mentioned, I was using VISA. Bank is involved either way.
Doesn't matter. The bank's exchange rates are generally fixed to Bank of Canada or some other published benchmark, plus foreign exchange fee, 2.5% is common, some cards (Amazon) offer no forex fee. These are all known in advance and part of the terms and conditions for your card.

How is the rate the merchant offers set? What extra fees are involved/hidden from you? Who benefits from the rate they choose? Was it disclosed to you?

Want more information, I'll suggest Credit card in our wiki, it contains a section on currency conversion or Dynamic currency conversion - Wikipedia. Educate yourself and protect your own interests.
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Re: Travel/Vacations

Post by kcowan » 16 Feb 2017 16:52

tedster wrote:Not certain I mentioned, I was using VISA. Bank is involved either way.
The bank will add 2.5% vig so you need to compare that to what the merchant is offering. Just check the math.
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Re: Travel/Vacations

Post by pmj » 16 Feb 2017 17:04

kcowan wrote:The bank will add 2.5% vig so you need to compare that to what the merchant is offering. Just check the math.
The vig is not always declared. And I've yet to see anyone charging less than 2.5%.
A helpful store clerk at AMS told me that if I want to pay in local currency, just say no to the C$ charge, and it will switch to local currency. So far that's been universally successful.
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Re: Travel/Vacations

Post by AltaRed » 16 Feb 2017 17:15

Interestingly, my recent eperience in Costa Rica was the bigger establishments showed the price in both local currency and in USD, usually with the conversion rate shown. In all cases where they showed the conversion rate, it was as good as the currency market rates, e.g. 560 +/-2 colons per USD. But then most tourist establishments readily accept and give change in USD too. Obviously, I would take their USD option charged to my USD Credit Card and forego any forex commission by the CC company. A rare exception in countries not using the USD as the official currency.
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Re: Travel/Vacations

Post by tedster » 16 Feb 2017 19:45

kcowan wrote
The bank will add 2.5% vig so you need to compare that to what the merchant is offering. Just check the math.
I am at the supermarket and the casher is asking, presumably because he sees it on the screen. How would he know? Besides, is it the merchant? or just VISA?

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Re: Travel/Vacations

Post by pmj » 16 Feb 2017 20:23

In general terms, if you are offered the ability to pay in C$, it's probably the result of a "partnership" between the merchant and the business that provides CC payment services to the merchant (the intermediary between the merchant and VISA/MC). The latter has probably offered the merchant a cut of the ?3.5%? fee you are going to pay, using the carrot that it will help the merchant offset the CC co's merchant fee.
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Re: Dynamic Currency Conversion - merchant offering currency conversion

Post by kcowan » 17 Feb 2017 08:20

In my experience, it has always been better to accept the charge in local currency and this was before no-FX cards. The merchant is doing this for one reason: to make more money on the transaction
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Re: Dynamic Currency Conversion - merchant offering currency conversion

Post by Peculiar_Investor » 17 Feb 2017 08:35

I agree with kcowan. That's the point I've been trying to make all along here.
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