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DECEMBER 2017 nsstrvelr.cmset by Visa or American
Express – so paying in
your home currency
could end up costing
you more.WHAT SHOULD
YOU DO?
Check the current
exchange rate on credit
cards, which is reset daily
by Visa or American Express.
Failing that, just say no – and
insist on paying by card in the
local currency. You will still
pay the rate of the day plus the
foreign transaction fee (unless
you have a card that waives this
fee), but you will not suffer from
what will be a substantially worse
exchange rate.businesstraveller.comSMART TRAVELLER
hen you are paying
for something
abroad, sometimes
you are given the
choice of paying in
either the local or
your home currency.
The advantage of paying
in home currency is you can
immediately see what the item
will cost. The disadvantage is
thatitmightturnouttobemore
thanyouwouldhavepaidinthe
local currency.
When you pay in the local
currency,aswellastakinginto
account the rate of conversion as
applied by your credit or debit
card provider, you may also have
to pay a foreign transaction fee,
which will then be added into
your costs.WHAT HAPPENS
WHEN YOU USE YOUR
CARD ABROAD?
When you buy something (or
withdraw cash) abroad in the
local currency, it will be subject
to the exchange rate the banksUnderstanding dynamic
currency conversion
When checking out of your hotel, you are offered the chance to pay in
the local currency or your home currency using your credit or debit card.
What should you do?Just say no –
and insist on paying
by card in the
local currencyapply and, in addition, a foreign
transaction fee will probably
be levied. This fee will depend
on the card you are using.
(Some cards do not charge
the fee, although this may be a
promotion or they may recover
the cost in some other way,
for example, through the
exchange rate.)
Both the transaction in the
local currency and the foreign
transaction fee will be converted
into your home currency using
what is called “the payment
scheme exchange rate” from
the day your transaction was
processed. (For American
Express, this is converted into US
dollars first, then your currency.)
The two amounts are then
added together and divided by
the original currency payment
amount to work out the
applicable exchange rate.WHAT IS DYNAMIC
CURRENCY CONVERSION
AND SHOULD I USE IT?
Dynamic currency conversion is
the term used for giving you the
choice of paying in either local
or home currency. Paying in your
home currency makes the price
you’re paying clearer and means
you don’t have to pay the foreign
transaction fee. But the retailer
may still be charging you a
conversion fee, and the exchange
rate – set by the retailer – might
not be as competitive as the onesWHEN IS DYNAMIC
CURRENCY CONVERSION
A SCAM?
It’s a scam when you’re not
given a choice in paying it. For
instance, when settling the bill
in a restaurant, check that the
conversion has not already been
made when the point of sale
machine has recognised your
card as “foreign”. Our forum
users have encountered this.
You can insist on paying in the
local currency, no matter what
the retailer, hotel or restaurant
says, but you may later see a
voided transaction on your bill.
In addition, it is often a scam
because it relies on “knowledge
asymmetry” – namely that we
are unable to easily and quickly
assess the overall extra cost of
paying in our home currency
rather than the local currency.
See more on our forum at
businesstraveller.com/forums/topic/
dynamic-currency-conversionW