What is Dynamic Currency Conversion?
Dynamic Currency Conversion (DCC) is an option for Visa and MasterCard credit/debit card users to have the cost of their transaction converted to their home currency when making a payment abroad.How does it work?
When a consumer pays for a product or service in a country where the currency is different to their own, DCC allows that customer to see the exact amount they will be charged in their home currency.The card machine will identify the card issuer and the country of issue, and the cashier will offer the option for the consumer to pay in their home currency. The consumer then sees the exact amount that will be charged to their card shown in their home currency so there are no nasty surprises when they get their statement.
What will the exchange rate be?
The exchange rate will be set daily and preset by the vendor. The consumer will know exactly the cost of their purchase. The consumer then has a choice to pay by DCC at this rate or let the card issuer do the conversion.What is multi-currency pricing?
Whereas DCC shows the exchange rate and associated home currency price after the transaction, Multi Currency Pricing (MCP) shows the price in a consumer’s home currency prior to purchase.When shopping with an online retailer, for example, there will be the option to see all goods available in the home currency of the customer irrespective of the location of the retailer. Although the price shown with DCC or MCP will arguably be identical, MCP could be said to more fully inform the customer and allow them to make an easier purchasing decision.
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| Image taken by photograham on Flickr |
What are the benefits to the customer of using DCC?
The main benefits to a customer using DCC are:• The ability to understand the correlation between a foreign price and home currency charges when purchasing goods and services abroad with a credit card.
• Peace of mind that comes with being able to keep a home currency account of all spending
• Particularly for frequent business travelers, the ability to more easily keep track of and submit expenses
What are the considerations in to using DCC?
The very nature of DCC means that the vendor will earn a percentage of the transaction value that would have otherwise gone to the bank which issued the card.Tips for before your departure date
For travelers, it would be advisable to have an approximate understanding of the current exchange rate so they can judge if the retailer’s DCC rate is competitive. There are a number of smart phone apps available to monitor exchange rates across the globe.It is also advisable for travelers to inform their bank of any lengthy travel plans before leaving the country as this will ensure that transactions are not flagged as suspicious. Often if transactions or card activity is flagged as suspicious by banks it can result in a card being blocked until safety precautions and checks have been verified.
Payment protection is also worth considering when traveling and often it is advised to use credit cards rather than debit cards when traveling abroad.
ArthurAbout the Author:
Arthur is a blogger who regularly write articles about the technical aspects of small business like eCommerce platforms and handling card payments online.