We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Dynamic Currency Conversion?

M. McGee
By
Updated: May 17, 2024
Views: 6,951
Share

Dynamic currency conversion is a function on some credit cards that converts local monetary values into the form used in the card’s country of origin, before the user signs the receipt. This allows the user to make an informed decision on the price of the purchase before he is committed to it. This is primarily a way of safeguarding travelers from incorrect or over inflated prices while traveling. The service is only available on Visa® and MasterCard® credit cards, although other card companies sometimes offer similar services.

For the most part, dynamic currency conversion is a very simple operation. To begin, a merchant signs up for the dynamic currency conversion program, either through a third party or directly with a credit company. Merchants are then in direct control over the conversion rate used by their credit systems. While they can set the rate to nearly anything, the majority of users will use the wholesale conversion rate or the rate set by Reuters®.

When a customer uses a credit card on an activated system, they will have the option of using dynamic currency conversion. If she opts out, the transaction will go through normally and purchases will appear in the local currency of the card’s holder on the monthly statement. The printed receipt will typically use the terminal’s local currency. This process uses the conversion rate set by the card’s issuer or associated bank, typically the wholesale rate.

If a customer decides to use dynamic currency conversion, the receipt will have the sale total in local currency, including all applicable fees, and the total in the card holder’s local currency. This conversion rate comes from the terminal itself and bypasses the card’s issuer. These receipts will typically have a dynamic currency conversion disclaimer that prevents the customer from asking for a chargeback.

This disclaimer is very important to the store owner as dynamic currency conversion can have some major drawbacks on the customer side. Dynamic currency conversion is supposed to provide a ‘peace of mind’ service to travelers since they will always know exactly how much they are paying. In addition, it simplifies expense reports as all receipts have the cardholder’s local currency printed right on them. In reality, some merchants use this service as a way to overprice their goods.

There are two main points of detraction when dealing with dynamic currency conversion. First, the merchant sets his own exchange rate. If the terminal owner decides to charge a totally different rate from the real rate, he can. Second, there are fees associate with using the service that are added directly to the cardholder’s bill. When these two things come together, it is possible for the customer to end up paying significantly more with the program than without it.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
M. McGee
By M. McGee
Mark McGee is a skilled writer and communicator who excels in crafting content that resonates with diverse audiences. With a background in communication-related fields, he brings strong organizational and interpersonal skills to his writing, ensuring that his work is both informative and engaging.

Editors' Picks

Discussion Comments
M. McGee
M. McGee
Mark McGee is a skilled writer and communicator who excels in crafting content that resonates with diverse audiences....
Learn more
Share
https://www.wisegeek.net/what-is-a-dynamic-currency-conversion.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.