Why You Should Always Pay in Local Currency When Traveling

When you are using a credit card in a foreign country and asked whether you would rather pay in dollars (or whatever your home currency is) or the local currency, you should always pay in the local currency.  This is because if you choose to pay in your home currency rather than the local currency you will be overcharged.

This is due to a scam called dynamic currency conversion. This “service” is provided by the credit card payment processor. It is touted as a benefit to the consumer since it is easier for them to understand how much they are paying when the price is paid in their home currency. However, it is obvious to me that this just a way for the merchant and card processor to make actual profit. If it was actually a service the merchant would explain the choices and disclose that there is a fee for using the home currency. In my experience they never disclose that it will cost you more to choose your home currency.

When you use dynamic currency conversion you are charged an extra fee for converting from the local currency and home currency and a much worse exchange rate is also used. This results in you being overcharged for your purchase by several percentage points. Even though this overcharge is just a few percent it can really add up over several purchases or on a large purchase.

I have a couple of examples from my current visit to Thailand. I am having some dental work done that is going to cost me a little over $1200. After my first visit I was asked to pay for half of the cost of the dental work. I was asked whether I wanted to pay in dollars or baht. Since I was aware of the dynamic currency conversion scam I knew to choose to pay in the local currency of baht.

Out of curiosity of how much extra I would have paid for using dollars, I noted the price for the dollar option. By paying in dollars I would have paid $637. By paying in the local currency and letting my credit card company convert the currency from baht to dollars I only paid $616. If I had opted to pay in my home currency I would have been ripped off of $21 by the dynamic currency conversion scam.

Unfortunately, sometimes the merchant doesn’t even ask you if you want to pay in your home currency or the local currency. I had that happen at a Thai pharmacist. He didn’t say anything about paying in dollars or baht. It wasn’t until after I signed the credit card slip that he gave me an additional slip showing that the price was charged in dollars.  The credit card slip I signed showed the price in baht, although it may also have displayed the price in dollars somewhere on the slip. I will be sure to check my credit card slips more carefully from now on and specify that I want to pay in baht even if they don’t ask what currency I want to use. Although I was only overcharged $1 by the pharmacist I will be disputing the purchase amount. I do not want them to profit at all from this scam.

I am hoping that someday merchants will stop using dynamic currency conversion or the credit card companies will not allow the payment processors to add-on dynamic currency conversion charges. For now, all I can do is decline to pay in my home currency and stop frequenting merchants that try to rip me off.

I need to get a dental implant in addition to the dental work I’ve already had done. Since my current dental office tried to rip me off I will not be getting the implant from them. After my current dental work is done and payment is completed I will let them know why I am not getting the implant from them. Perhaps if enough people complain and stop using merchants that employ this deceitful practice it will stop being used.

In addition to always paying in the local currency, you should make sure that you always use a credit card that does not charge a foreign transaction fee. This a fee (usually 3%) that many credit card companies charge you for making a transaction in a foreign currency. There are many credit cards that don’t charge this fee so the fee can be easily avoided. Make sure that any credit cards you bring for international travel do not charge a foreign transaction fee. I brought three credit cards with me for this trip and I made sure none of them charge foreign transaction fees. There is no reason to pay more than you need to.

Were you aware of the dynamic currency conversion scam? Have you ever been victimized by this scam?

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