Travel Tips: Use Local Currencies to Save Money
While traveling, have you ever used your credit card to buy something and been asked if you want to pay in the local currency, or your own?
This is called "dynamic currency conversion," or DCC — a service that allows tourists to pay using their home currency even when abroad.
DCC can be convenient, because it's easier to understand the cost of things when using a currency that you know. In fact, a 2018 study found that over half of tourists prefer this option.
But DCC is also more expensive.
Imagine you're an American traveling in the UK, and you buy something that costs 80 pounds — about $100.
Credit card conversion fees for paying in the local currency are usually between 1.5% and 3%. So if you pay using British pounds, it might cost up to about $103 total.
But a 2017 study from the European Consumer Organization found that the average fee for using DCC was 7.6% — and could be as high as 12%. And this was in addition to the official credit card rate.
Why is it different?
Well, when using the local currency, the conversion is handled by your credit card company or bank.
But when you use DCC, a third-party company converts the money.
And the 2017 study found that using DCC was more expensive 99.7% of the time.
So why do people keep using it?
One reason might be that they don't know it costs more. Tourists may only be shown the exchange rate without being told about the extra fees.
And third-party DCC companies don't just make money from conversion fees — they often share part of that money with the store. So shops often encourage customers to use DCC.
So, the next time you're in a foreign country and asked how you want to pay, remember that using the local currency — instead of your own — can help you pay less!
