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Part of a credit card slip, indicating that DCC takes place
Dynamic currency conversion (DCC) or cardholder preferred currency (CPC) is a process whereby the amount of a credit card transaction is converted at the point of sale, ATM or internet to the currency of the card's country of issue. DCC is generally provided by third party operators in association with the merchant, and not by a card issuer. Card issuers permit DCC operators to offer DCC in accordance with the card issuers' processing rules.[1][2] However, using DCC, the customer is usually charged an amount in excess of the transaction amount converted at the normal exchange rate, though this may not be obviously disclosed to the customer at the time. The merchant, the merchant's bank or ATM operator usually impose a markup on the transaction, in addition to the exchange rate that would normally apply, sometimes by as much as 18%.[3]
Without DCC, the currency conversion would take place by the card issuer when the transaction is charged to the card holder's statement, usually a day or two later, but for an increasing number of cards in real time. Even though the card issuer will publish the exchange rate used for conversion on the statement, most do not disclose the exchange rate used to convert a transaction at the time of payment. Both Visa[4] and Mastercard[5] state that the rates they publish in advance of a transaction posting to a cardholder's statement are indicative, since the rates they use for conversion correspond to the date and time they process the transaction, as opposed to the actual transaction date.
With DCC, the currency conversion takes place at the point of sale. Unlike a credit card company, a DCC operator must disclose the exchange rate used for conversion at the time of the transaction according to credit card company rules which govern how DCC is offered.[1][2] The DCC exchange rate must be based on a wholesale interbank rate, to which any additional markup is then applied. Visa requires that this markup be disclosed to the cardholder.[1][2] The credit card company may still charge an additional fee for charges made outside the card holder's home country, even when the transaction has been processed in their home currency with DCC.
Proponents of DCC argue that customers can better understand prices in their home currency, making it easier for business travelers to keep track of their expenses. They also point out that the customer has full transparency inclusive of conversion fees, and can make an informed choice whether or not to use DCC. The financial benefit to the merchant or their card processor may be an incentive for the merchant to offer DCC even when it would be disadvantageous to the customer. Opponents of DCC argue that many customers do not understand DCC, and point out that DCC markups are usually higher than the card issuers' currency conversion fees, and therefore, in almost all cases, opting for DCC will result in a higher cost to the cardholder.
Due to the strategic threat posed by DCC on Visa's core revenues (namely, currency conversions), in 2010 Visa attempted to ban DCC. However, the Federal Court of Australia found that Visa acted anti-competitively to protect its own revenues and was fined $A18 million.[6]
^ abc"Archived copy" (PDF). Archived from the original (PDF) on 18 October 2020. Retrieved 22 April 2017.{{cite web}}: CS1 maint: archived copy as title (link)
^Guy, Anker (4 July 2016). "The worst 'paying in pounds abroad' rip-off I've seen – where £160 of cash costs £190". MoneySavingExpert.com. Retrieved 30 August 2017.
^"Visa ordered to pay $18 million penalty for anti-competitive conduct following ACCC action". Australian Competition & Consumer Commission. 4 September 2015. Retrieved 26 March 2021.
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