Another take on DCC

The crappy DCC rate will far exceed a nominal 3% from your personal bank. In Bayonne, France 2 months ago, a Credit Agricole ATM wanted to charge us well over $30 extra to withdraw €360 worth in dollars, which was never our intent. I didn’t expect to see DCC on that ATM, but it wanted upwards of 10%. Usurous!

Even though DCC may be in dollars, an ATM withdrawal in Europe (or any other foreign location) is still a Foreign Transaction. It is not a foreign conversion.

the rep told me that if I chose to have the merchant charge in USD
(i.e., DCC) there would be no foreign transaction fee.

I'm not sure that is true. I think maybe he meant there would be no currency exchange fee. Over the years, I have asked many people at banks here what is the cost of foreign transactions with their bank, and I have received a lot of "inaccurate" answers.

I have not analyzed the foreign card processing network in a few years, but this was the way it was a then.

Use of cards in Europe are handled by the an informal collection of business collectively called "The Network". They are separate businesses handling ATM and Point of Sale transactions; they're attached to the card (Visa, M/C, ?) you are using. They all do the same thing. They handle the transfer of money from your bank to the ATM owners or retailers in Europe, and they convert the currency in the process.

Years ago, the Interchange fee, the fee they charge your bank for the service, was just called a "currency exchange" fee. Wells Fargo had their own foreign currency operation, so they said, "we'll just pay you in Pounds, Mark, Franc, etc, and then, since you're not exchanging currency, we won't owe you anything. Well, the Network operators weren't going to transfer the money for free, so they broke it up into a "Cross-border Transaction Fee", where they pay the European entity and bill your bank, and a "currency exchange fee". Each fee is about ½%, ±1/10%, for a total of 1%.

My credit union just passes the 1% fee to me. Some big banks, Bank of America, Chase, USBank, I think, pass the 1% fee they pay on to you and add another 2% for themselves (a 200% profit!). Wells Fargo, on my last trip, charged me $5 for an ATM withdrawal up to $500 in euro, which was just over 1%. A few banks, like Schwab or, I think Citibank (or is it Capital One), eat the 1% fee as a service to their customer (but since they're discounting the payment to the merchant by several %, they're not losing money).

So Citibank doesn't mind if you pay the conversion fee for them (DCC) and they only have to eat the ~½% Cross-border Transaction Fee.

On my last trip, Deutche Reisebank tricked me into DCC. I forget what they charged me for currency conversion, but it was more than 1% (vs. ½% from the Network). My credit union only passed on to me the ~½% Cross-border Transaction Fee, since there was no charge for currency exchange.

So is DCC a scam. Well, it is not a scam if you are told that it's optional and will cost you more that way, but otherwise, if it is snuck in or if you are not aware or you were tricked into believing you had to accept it, then it is a scam.

It is unfortunately legal as it is allowed and not controlled.

But as far as I am concerned it is a scam when they word it to you such as if you don't accept this there is no guarantee as to what the exchange rate is. Or then confuses the answers so that you are accepting it when you think you are declining it. And it is a scam when a waiter or merchant processes it through before you can read it and only shows you the accept button (or does so for you). It is a moral scam when you are simply not given the correct information to make your own decision up regrading your own money.

FWIW, I see the withdrawals from my Schwab or VCapOne accounts come out at less than 1/2 of 1% of the daily exchange rate as a surcharge, and the purchases on my CapOne MC and Amazon Visa from Chase go at that exchange rate.

it is a scam when they word it to you such as if you don't accept this
there is no guarantee as to what the exchange rate is.

Yeah, there is no guarantee as to what the exchange rate will be, but you can be guaranteed that the exchange rate they are offering you IS more than what your bank will charge you.

In the case I mentioned above, with an ATM withdrawal through Deutsche Reisebank, they showed a screen that just looked like a summary of the transaction with an accept button that just looked like you'd have to click it to finish the transaction and get your money. It only occurred to me later that it showed the amount I would be charged for currency exchange, and that they would not know what it was. I went back the next day and withdrew a nominal amount and declined the offer and still got the money.

@Lee, in discussion with the rep, I asked her to clarify the exact point that you mention. I could tell she was reading from their stock list of FAQs for foreign travel not off the cuff, but she was pretty clear that it was the FTF that would not apply. We talked about the conversion rate as a separate issue as well. So yes, I suppose she could be lying or confused, but I'll take her word for now. I am just curious enough to find out when I'm there, and will report back either way.

As far as being a scam, I've said before, that I've watched Americans who have accepted DCC because they're persuaded it is a service they are willing to pay for, even after explaining it to them. Like many things the burden is on the consumer to know and understand how things work. Let the buyer beware. Yeah, when it's done against your will, I believe that is already illegal.

Even though DCC may be in dollars, an ATM withdrawal in Europe (or any other foreign location) is still a Foreign Transaction. It is not a foreign conversion

Then there’s the “Out of Network” fee with an ATM, and I’d imagine that applies to pretty much every customer from North America in Europe, unless their bank specifically reverses such fees.

At least banks don’t offer to have bills facing a particular direction for an extra charge. They come out of the ATM slot one way, but maybe some people would pay to receive them oriented differently. DCC is still a sleight-of-hand trick to gouge the unwary.

Well, my original post was referring to a credit card transaction from a merchant, hotel or restaurant, not an ATM debit transaction. So the circumstances may be different.

If DCC is offered to me, I am not interested...regardless.

My Citicard MC is not used for European purchases or even to book a hotel on booking.com, only for booking domestically.

The crux of the matter is CitiCard charges a FT fee, in contrast to other MC and Visa cards. These competitors offer more incentives. That's Citicard's problem, otherwise it is a valuable MC to use but only domestically.

The 2 absolute requirements I look for in applying for a Visa or MC is: no annual fee and no FT fee. I bring 4 cc to Europe, none has a FT fee, otherwise that card stays home.

Thanks Fred for the information that all Citi MC credit cards charge foreign transfer fees. I guess my point was, if what I was told is true, DCC might be advantageous if the conversion rate premium is >3% for those people that have cards that charge FTFs. Of course, a fee-free card is preferred (assuming there's not a substantial annual fee) but for those infrequent travelers that don't want or need another card, it could be seen as justification for picking DCC, or at least a wash.

I'm don't think I've ever seen a DCC charge as low as 3%, and I spend a lot of time in Europe. It varies, but something around 7% is rather common.

Present Euro to dollars is 1 to 1.11. Yesterday at AtM DCC was 1.27 as shown on the screen.
You can do the math.

I note you are talking CC charges at other than ATMs. If you make sure charge is in Euros than your fee for FTF may be only 3%. But if you go for the dollars at a restaurant you will have no idea of the conversion until you see it later.

True, the exchange rate is currently 1.11, I am waiting for that to drop back to 1.07 or 1.08 (I can live with that) , maybe in the spring, at which time I'll be back at Bof A to withdraw another 1200 Euro or so, no fee charged, to take on the summer trip of 2025. Most likely, Bof A will charge me 1.13 if the international rate stands at 1.07.