If you’d like to save some serious cash on your next vacation, there’s one tip above all others that can help you do it. Here’s what you need to know.
The Friendly Gesture
If you travel a lot, you’ll already have come across this “friendly gesture” from merchants. When you’re offering to settle up your account, they offer to translate their bill into your local currency (e.g. dollars or Euro). This sounds pretty good when you first encounter it, after all – it’s easier than doing the math in your head to work out what you’re spending, right?
What’s Going On Behind The Scenes
Giving you the bill in your currency isn’t somebody doing you a favor. In fact, it’s quite the opposite. The conversion process is known as dynamic currency conversion (DCC) or more occasionally as cardholder preferred currency (CPC). It allows either Visa or Mastercard users to receive an invoice in their own currency rather than the local currency. What they don’t tell you is that this is an expensive service.
You see when a merchant uses DCC, it gives the card issuer the chance to levy an additional markup over and above the day’s exchange rate. How much more? Well, typically it’s only 1-3% but it can be as much as 18%!
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How Much Does That Add To The Cost Of A Vacation?
If you assume that the typical overseas vacation costs around $10,000 for 2 people then you can see that DCC can cost you as much as $1,800 and even at a lower rate it’s going to take $100-$300 out of your pocket!
That’s a pretty steep charge for the privilege of seeing a bill in your own currency.
Save That Money
If you don’t want to pay it, make sure you insist that all bills you pay by card are in the local currency and that you check each invoice carefully to ensure it matches the sticker price or price that you were quoted. The most important time for this is when you check out of a hotel – your hotel bill is usually the largest share of your vacation cost and DCC charges make it even more expensive.
So if you want to save money – always pay in local currency.
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