Dynamic Currency Conversion (DCC) scams exploit an option commonly offered by ATMs or card readers in stores when a foreign debit or credit card is used.
When traveling abroad, you may notice that certain ATMs and card readers give you the choice to pay in your home currency instead of the local one. This is, in fact, the most frequently used tactic in DCC scams.
While this option may seem convenient, choosing DCC often leads to unexpectedly high charges, as it applies an unfavorable exchange rate. In this article, we’ll examine how DCC works, why it poses risks, and how you can avoid these additional costs when paying abroad.
1) How It Works
1.1 What is a Conversion or Exchange Fee?
Before diving into how Dynamic Currency Conversion scams operate, it might be helpful to understand the typical fees involved when you pay something or withdraw money abroad.
Standard conversion fees are applied by your bank or card provider when they convert your home currency into the local one, reflecting the basic costs of currency exchange plus the service processing. Not all card providers apply these fees (see How to Avoid It below), but many do.
These normal bank conversion fees are determined by your bank or card provider and are often relatively fair, aligned with market rates, and regulated for transparency. This helps ensure competitive rates and some protection for the consumer.
In contrast, Dynamic Currency Conversion (DCC) rates are set arbitrarily by ATM operators, local banks, or by arrangements between store owners and their Point of Sale (POS) provider. This flexibility means DCC rates can be set at whatever amount seems “acceptable” to tourists, who may not notice the actual fees unless they’re displayed clearly on-screen.
1.2 How Do DCC Scams Work?
Due to its customizable nature, the Dynamic Currency Conversion rate might be used to subtly exploit tourists by presenting a familiar currency option on ATMs and card readers, luring them to select their “home currency” for convenience. However, choosing DCC often results in a significantly higher cost, as the exchange rate is set arbitrarily by the store’s POS provider, or the ATM operator.
Here’s how this works in practice:
- When making a purchase or withdrawing cash abroad, you might be asked to choose between paying in the local currency or your home currency. In some cases, the DCC rate might be explicitly displayed, often as the default primary choice.
- Many tourists mistakenly assume that choosing their home currency will spare them extra fees or offer a better rate, a misconception that benefits merchants and ATM providers who are legally allowed to set their own exchange rates, often at a disadvantage to the customer.
To further nudge tourists toward choosing DCC, many POS and ATM machines employ subtle, misleading tactics:
- Highlighting the Home Currency/DCC Option: This choice is often displayed prominently to catch the user’s eye.
- Using Color and Font Manipulation: DCC rate options are usually shown in bright colors or larger fonts, while the local currency option is grayed out, placed on the side, or made less noticeable.
- Wording Traps: Some screens use ambiguous and misleading language that makes it seem as if choosing the local currency option might complicate the transaction. Terms like “yes” or “proceed” are commonly linked to the DCC option, while “no” or “decline” is associated with the local currency (AKA your bank one), making the choice seem more troublesome.
Additionally, both third-party ATM operators and some banks (names are omitted here for legal reasons) employ additional tactics to maximize revenue from unsuspecting tourists.
They often combine DCC with other strategies to extract as much as they legally can from travelers and visitors. Here’s how:
- Encouraging Larger Withdrawals: Many ATMs are designed to suggest large withdrawal amounts as the default, especially in tourist-heavy areas. The more a foreigner withdraws, the more they end up paying in DCC fees.
- Adding Extra Fees for Simple Actions: Some ATMs tack on extra charges for actions like checking your balance, adding a few dollars or euros per inquiry. These additional costs are usually hidden until they’re applied, leaving travelers with limited options once they start using the machine.
2) What You Risk
The conversion rates offered through DCC are often much higher than the standard rates your credit or debit card company would apply. This setup allows merchants and ATM providers to make a substantial profit at the expense of uninformed travelers.
In fact, you may end up paying up to 10% or more above the interbank rate in some cases, with the markup varying by country, ATM provider, or merchant.
Some of the more dishonest operators may even attempt to hide the full cost of DCC until the last possible screen, surprising you with the higher fee only once it’s too late to back out.
Additionally, if you end up selecting excessive withdrawal amounts at ATMs, you might be stuck paying large fees for cash that you won’t fully use and that you may even need to reconvert later, paying another round of exchange fees.
3) How to Avoid It
From my experience, I’ve noticed that the DCC scams can vary, even significantly, depending on the country, the company managing the ATM, or even the specific tourist shop. However, they generally rely on a combination of the three main tactics we discussed earlier:
- Highlighting the Home Currency Option,
- Using Color and Font Tricks,
- Wording Traps.
Along with the next five tips, the best advice I can offer is to pay close attention to the screens you navigate and the options you select when paying with a card or using an ATM abroad. Read through the text presented carefully, and check for options, notes, and asterisks, especially when withdrawing money.
- Consider Choosing the Local Currency Option: When paying or withdrawing abroad, opting for the local currency often means using your bank’s exchange rate, which is usually more favorable than the DCC rate at the terminal. Keep in mind that the local currency option may be less prominent than the DCC one.
- Check Your Withdrawal Amounts Carefully: Some ATMs and banks, in addition to emphasizing the DCC option, may suggest large withdrawal amounts as the default. However, there’s often a scrolling option to select smaller, more reasonable amounts. Just look for those alternatives.
- Carry Cash for Small Purchases: To avoid fees on minor transactions in shops or restaurants, consider carrying some local cash. This can help you sidestep both DCC and general card fees at least for smaller expenses.
- Use a Travel-Friendly Card: Before your trip, think about getting a credit or debit card with low or no foreign transaction fees. Some cards even offer protections and benefits specifically for international travelers, helping you save on every purchase abroad.
- Lastly, if you use an ATM, try looking for reviews of past user experiences with the ATM provider, especially—but not exclusively—if it is operated by a non-bank entity.
4) Extras And Thoughts
We want to clarify that the Dynamic Currency Conversion (DCC) rate itself isn’t inherently a scam. In some cases, DCC fees may even be comparable to traditional currency exchange fees.
However, due to the potential for high, often unchecked markups, DCC is frequently exploited by merchants and POS/ATM providers to profit off unsuspecting tourists and foreigners. The lack of regulatory oversight on these markups further encourages businesses to apply inflated conversion rates. Additionally, shop owners may not always be fully aware of the extra fees embedded in the DCC rates by their providers.
This article is based on research and firsthand experiences to highlight scams that have occurred up to now. We encourage vigilance around these practices, as DCC-related scams and the screen designs (UX/UI) and wording used to push them can evolve, adapting to work around some of the countermeasures that travelers might otherwise employ.
The examples and information shared here aim to offer insight into how DCC-based tourist scams work, helping you stay aware and, through even basic knowledge, add a layer of protection.
For more articles on other ATM and credit or debit card scams, check out our full list below.
4.1 ATM&Co Related Scams
Content Disclaimer and Call for Reports
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