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If you are planning to take a trip abroad this year and plan to make use of your American credit card do not be surprised if you are handed a bill in US dollars rather than the currency of the country you are in.  This practice is known as dynamic currency conversion (DCC) and is a practice becoming widespread around the world.

On the surface it will seem convenient and simple enough; you will know what you are spending and being charged in your own familiar currency but there is a catch. If you agree to that pre-converted bill you just may well be up for paying higher exhange rates plus credit card fees.

In using DCC the companies take a competitive exchange rate but you will find that they are higher than the interbank exchange rates. DCC is more widely used by firms such as car rental agencies, hotels and high profile department stores such as Harrods. The difference in the rates is due to a cut carried by DCC for the processing bank and the merchant. This is proving to be a goldmine for the merchants of course.

Since April 2005, Visa added a one percent International Service Assessment for all US dollar transactions outside the USA regardless of the currency in which the charge was made. Whether or not the charge gets passed onto you, the customer, is ultimately up to the bank.

One way around this is to demand your bill be issued in local currency - if you are presented with a pre-converted bill ask for it to be converted back to the local currency. You are well within your rights to demand this; if the merchant tries to pressure you into accepting the pre-converted bill ask for a manager as it is against their merchant agreement to refuse this request.

Check the rate:

Should you wish to pay in US dollars when you are presented with the local price ask for the conversion rate and the final price in your US currency.

Check with the bank:

Compare cards; ask your bank what their charges are for foreign transactions - not all banks pass the charges onto their customers.

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