A note about ATM's.....

Thanks, Ken, for the timely post. I just got back from Poland, and every hotel and restaurant we went to have us the option to charge in US dollars or zloty. In prior trips, this happened maybe once or twice. It's kind of annoying because there isn't any benefit for customers to charge in their home currency.

In the first place, your bank will still charge you the same percentage for a European transaction, whether it is in that country's currency or yours, so you won't be saving the "currency conversion fee" of 0 to 3%. Secondly, the ATM bank/merchant converts the charge in their currency using some exchange fee that is probably more advantageous to them than the Interbank rate.

Ken: I'm sure you took the local currency option, but did you also note the amount you would be charged in your currency so you could compare their exchange rate to the Interbank rate for that day?

The Bankster's never rest when it comes to finding new ways to extract cash, or expanding existing ones. Thanks Ken.

Excellent advice. I ran into DCC all over Spain. I complained to the clerk at the Prado Museum gift shop that this was a scam, and he told me that merchants have no control over this--it's the bank's doing. Not sure if this is true everywhere, but I've heard that Europeans visiting the State also experience the DCC scam.

And the other issue with this is that when you attempt to decline DCC you can get a screen that challenges you on this and when read quickly you can misread and think that by declining you are canceling your transaction. They also use the lovely wording of "if you don't do this we can't guarantee your exchange rate," making someone who is not aware of what is happening think that they will get a worse exchange rate if they don't lock this in. We just saw this this past month on a bank-owned ATM in the arreival hall at Budapest's airport, we did not see it elsewhere in Budapest, nor in Istanbul.

I'm currently in Europe and have been here for the last 3 weeks and everyplace, except smaller shops, is posing the "Local or USD currency" question.

In 2013 I got dinged with the DCC for a pretty small purchase at a souvenir shop in Spain. The DCC was automatic - the clerk checked and said that there was no other option. After that, I paid cash for everything I bought "over the counter" (i.e, shops, restaurants, entrance fees).

From everything I've seen from card company boilerplate, the DCC charge can not be automatic on a credit card. If the clerk says it is, it simply means he either does not know how to or does not care to correct it. The only time this was presented to us, we refused to authorize the charge and paid cash. We simply will not support this business model.

You are correct Ken: it is all over the place now. Unwitting travelers will be paying a premium for this "convenience." Turn it down. It only benefits the bank and the merchant.

Thanks for the heads up, Ken.

The private ATMs in large railway stations in Berlin now flatly refuse to do a transaction with a foreign card unless you accept dynamic conversion.

"I complained to the clerk at the Prado Museum gift shop that this was a scam, and he told me that merchants have no control over this--it's the bank's doing."

For point-of-sale credit and debit card billings, I can believe that the banks are doing it. As I have pointed out several times, the EU is imposing a limit on how much banks can discount the payment to merchants to 3/10% and 2/10% respectively, instead of the about 4% they have been getting in the past.

I've always paid in cash whenever I can. More reason now. Let's hope this (no option except DCC) doesn't spread to bank run ATMs (private ATMs can already make their own rules).

Lee,

"Ken: I'm sure you took the local currency option, but did you also note the amount you would be charged in your currency so you could compare their exchange rate to the Interbank rate for that day?"

I didn't make note of the difference in the rates at the time I was processing the transaction. I just assumed the local currency rate would be better than the DCC rate, so accepted that by default. However, I did "slip-up" on one occasion during my recent trip and accepted the DCC rate, so can provide some data from that one transaction.

When paying the bill at a hotel in Switzerland, I was in a hurry at check-out, as I didn't want to miss the train I had booked. I wasn't paying as much attention as usual and took the DCC option. Based on the Canadian dollar exchange, I was charged a rate of 1.4074915. In comparison, the average exchange rate of my ATM withdrawals in Switzerland this year was 1.40315. Given the small sample size, it doesn't provide a completely accurate picture, but does provide some idea. In this case there wasn't much difference, but I'm sure the picture would be different with a greater number of transactions to compare.

I'll be paying more attention to the difference in rates on my next trip.

Bank-owned ATMs have been running DCC for years. Just say no, even if you are warned that your hair will fall out and your teeth go green if you do.

Shops can always avoid DCC. Staff who claim otherwise have either not been trained properly in operating the POS equipment, or trained too well in misleading their customers.

Ken,

we need to know a few more things:

1) the date of the DCC transaction, and
2) was the ratio, 1.4074915, the ratio of the DCC bill in $CA to the bill in euro, or the ratio of what you were charged by your bank on your credit/debit card bill vs the bill in euro. If the ratio of the amount charged on your banks bill, with any bank charges, was 1.4074915 vs 1.40315, then they only charged you 3/10% for the DCC - hardly worth commenting about.

"In comparison, the average exchange rate of my ATM withdrawals in Switzerland this year was 1.40315."

According to Oanda, since August 27, 2015, the Ca$ to euro ratio has never been over 1.385. In fact, since August 28, it has not been over 1.379, and it has been as low as 1.345. It's averaged (eyeball) about $1.36CA per euro. If your average charge was 1.40315, it looks like your bank is charging you 3% for the foreign transaction.

If the DCC charge vs the euro charge was 3% over the Interbank rate and then your bank added it's own 3%, then we have a problem.

Lee,

Regarding your questions.....

1. The date of the DCC transaction was 13 Sept.
2. The amount of the bill was CHF444.50 and the amount calculated by the DCC system was Ca$625.63, a percentage of 40.7492%. My financial statement only had the Canadian dollar amount shown, so they didn't know what the CHF amount was and didn't do any conversion. I agree, in this case with a small difference like that, it's not a problem.

"According to Oanda, since August 27, 2015, the Ca$ to euro ratio has never been over 1.385."

Just to clarify, in this particular case the currency being referred to is the Swiss Franc. My average rate for Euro conversion this year was 1.5530. Whether that's a good rate or not, "it is what it is" and that's what my credit union charges. According to my statements, the only fee they add is a $3 service charge on each withdrawal.

Sorry, Ken. I was looking at Swiss Francs vs Canadian Dollars on Oanda, I just wrote euro out of habit. On Sept 13, 2015, the average Interbank rate for the day was 1.37021. According to Oanda, at a discount rate of 2%, you would have paid $621.49 CA for 444.50 CHF. Of course, that was according to the average rate; your bank doesn't have to use the average. (Did the $625.63 include the $3 fee?) (Edit: there wouldn't have been a $3 ATM fee for a POS transaction.)

It will be interesting to have others note 1) the date of the withdrawal, 2) the amount of the withdrawal in local currency, 3) the DCC amount offered, and 4) what appeared on their statement. Of course, if they decline DCC, 4 won't matter, but still what was offered with DCC could be telling. It will also be interesting to find out of the DCC amount offered by an ATM is the same as offered with a POS transaction.

Lee,

The amount of $625.63 was a single line item on my credit card statement, in Ca$. It doesn't look like there was any $3 fee charged on that transaction. It's possible the DCC network has a network connection in Canada so the transactions appear as if they occurred here.

I also made a couple of ATM withdrawals from another of my financial institutions (a bank), but I haven't compared the exchange rates I was charged between the credit union and the bank.

I have not seen this in any charges or ATM withdrawals during the past 4 weeks in Italy. Might this be applicable only in certain countries?

Hi Ken,
I did not encounter this while using the ATM's on my recent trip to Spain, however, I was given the option to use the DCC when paying bills at most hotels & some shops. I always declined it, of course.

I just checked my credit card statement & compared what I was charged to what the bank paid & there is definitely a 6-7% mark up.
(My CC does not charge international exchange fees)
I did save all my cc receipts (which were stapled to the DCC 'receipt') & was able to calculate that the exchange rate is 3-4% higher than the Interbank rate. The DCC 'receipt' shows the conversion rate & it also states this: 'Includes 3% Mark Up over wholesale rate'

The bottom line, as Ken mentioned above, choose transaction processing in the local currency when paying bills... or pay cash for everything.