Dynamic Currency Conversion

Just say no.

The practice seems most prevalent in Europe, but some merchants (anywhere in the world) will offer to charge your credit-card payment in U.S. dollars rather than in the local currency. Don’t do it. This “dynamic currency conversion” can cost you as much as 5% more for your purchase, as the exchange rate the merchant uses is usually much higher than the Interbank exchange rate. This is even worse than the 3% most Visas or MasterCards charge. Again, simply refuse. Visa representatives say that any merchant accepting their cards must allow the customer to pay in local currency.

Also watch out for international purchases through PayPal. On a recent purchase, we were offered to convert the price (in British Pounds) to U.S. dollars “at the PayPal exchange rate.” We declined, as it would have been much less favorable than using the open-market Interbank rate. On our $35 purchase, the PayPal exchange rate would have added more than $2 to our transaction. Can you spell “rip-off”? Just another reason to dislike (and avoid) PayPal. If you must use them, decline the PayPal exchange rate if possible (some PayPal merchants seem to offer this option, some don’t), and if paying with a credit card (whether through PayPal or directly) use a 0% foreign-conversion fee card such as Capital One or Schwab.

(This is part 2 of a short 3-part series of updates on international credit card and ATM use. Part 1. Part 3.)