Dynamic Currency Conversion

What Is Dynamic Currency Conversion, How Does It Work & How Do You Avoid It?

Aug 14, 2025

Fact checked

Written by John S Kiernan

WalletHub Managing Editor

Fact Checked by Alina Comoreanu

WalletHub Senior Researcher

Dynamic currency conversion is a service that can convert your credit or debit card transaction from the local currency into U.S. dollars when you’re shopping in another country. While it may sound like an enticing offer, this conversion is very expensive and you should refuse it when a merchant asks. Generally, when overseas merchants make this offer, they will use a conversion rate that is far higher than the actual going rate.

Key Things to Know About Dynamic Currency Conversion

Increased cost: Merchants may use a conversion rate that’s more than 10% higher than normal and pocket the difference as a fee. They get away with it because many customers don’t check the math at the point of sale.
Relationship to foreign transaction fees: Some customers incorrectly assume that if they use DCC they can avoid the foreign transaction fee that most credit cards charge. In reality, the credit card company will generally charge the foreign transaction fee in addition to the merchant charge related to DCC.
How to save the most money: By avoiding dynamic currency conversion and using a credit card without a foreign transaction fee, you can save yourself up to 15% (12% from DCC + 3% foreign transaction fee) on each of your purchases, both online and in person.

Below you can find more details about dynamic currency conversion as well as tips for minimizing your expenses when traveling abroad.

Table of Contents

Your Rights and Options When Dealing With DCC

As a customer, you are entitled to full disclosure of DCC, conversion rates, final costs and any other fees charged for the transaction. You also have a right to refuse DCC. If you refuse DCC at the point of sale but the charge later appears on your bill with an inflated currency conversion rate, you can dispute the charge with your issuing bank. If that doesn’t work, you can take up the issue with the relevant card network’s global compliance program.

However, keep in mind that requesting to reverse multiple charges can be a huge headache. Disputes often last a long time, and there’s no guarantee your request will be honored. The simplest way to avoid unnecessary charges and hassle is to make sure you pay in the local currency at the time of sale and refuse any offers to convert your transaction to your home currency.

Back Office DCC

History: Years ago, merchants were not required to disclose to customers when DCC was used in a transaction. This process was known as “back office DCC.” But updated requirements from Visa and Mastercard have prevented further back office DCC from taking place.
Current rules: All credit card companies have outlawed the practice and imposed serious penalties on violators.
Shady merchant practices: Many merchants automatically select DCC without the customer’s consent when processing a transaction, and customers may not notice if they don’t check their receipts closely. Other merchants will falsely claim that their POS terminals automatically converted the purchase price to the customer’s home currency.

So in conclusion, even though merchants are required to disclose DCC to you, don’t assume that they’re always going to follow those rules. Pay close attention to your purchases to make sure they get charged in the local currency and not your home currency.

Payment Platform Conversion Rates

PayPal Conversion Rate

You may be familiar with PayPal’s currency conversion service if you’ve ever used PayPal to do either of the following:

Send or receive money in a foreign currency
Make a purchase in a foreign currency

PayPal uses its own PayPal Conversion Rate to do DCC, but it operates essentially the same way. Here’s how PayPal’s conversion process works when you transfer money (applies only when using your credit card):

1. Before you finalize a transaction, PayPal will display the amount you wish to transfer expressed in the foreign currency, followed by the amount in your home currency.

PayPal will display the conversion rate used in the calculation (e.g. 1 USD = 1.5 EUR). These rates are updated daily.

In the “Payment Method” section is also a link to “Other Conversion Options,” the first of which is PayPal’s own conversion process and the other Visa’s and MasterCard’s.

2. You can choose whether to use the converted total or simply charge the transaction in the local currency. Naturally, you should pick the local currency.

3. If you choose to convert your currency, you will end up paying an extra 3% to 4% (or potentially even more) on top of the normal conversion rate.

Paypal Currency Conversion 21

Since the CashApp card is a debit card, when you use it at foreign merchants, you’ll still need to decline dynamic currency conversion at checkout and make sure the merchant doesn’t automatically select it.

Venmo Conversion Rate

Dynamic currency conversion isn’t something you need to worry about with Venmo because you can’t use Venmo outside of the U.S. In fact, the app won’t even allow you to log in while you’re abroad.

Venmo recommends using PayPal for international transactions while abroad because PayPal is its parent company.

How to Avoid Dynamic Currency Conversion & Save Money

The best ways to save money when making international purchases are to use a credit card and a debit card with no foreign transaction fees and explicitly refuse DCC at checkout. You should also pay close attention to ATMs to make sure they don’t use DCC, as well as use a currency converter app to make sure you don’t get ripped off if you ever do need to convert.

Apply for a No-Foreign-Fee Card

The best way to minimize your spending while traveling abroad is to get a no foreign transaction fee credit card. Most credit card issuers charge fees for using some (if not all) of their cards internationally. To avoid this, make sure you apply for a no foreign fee card before you book reservations or depart for your travels. Also compare your card options thoroughly. While some credit card companies – like Discover – don’t apply international service charges, where you can use them may be more limited.

Always Refuse DCC

While it’s tempting to see your transaction in a familiar currency, you should always refuse DCC and use a card that doesn’t charge foreign transaction fees. With such a card, you can save up to 15% (12% DCC fee plus 3% foreign transaction fee) on each transaction.

Keep in mind that DCC is not mandatory. If a merchant selects DCC without your permission (your receipt will display your total in your home currency and the local currency), you should ask the merchant to void the initial transaction and run it again in the local currency before signing your receipt.

Beware of Deceptive ATMs

Some independently owned ATMs will offer DCC but disclose it ambiguously. To mask the service, they might offer to “lock in” or “guarantee” a conversion rate. You should instead select the option to “proceed without conversion.”

Others might phrase it differently. For example, they might say: “You can be charged in dollars: Press YES for dollars, NO for euros.” Always press “NO” and select the local currency.

Announce Your Travel Plans

Make sure to always notify your credit card issuer of your travel plans, including dates and destinations. Some banks and credit card companies allow you to input that information online. You can also call customer service. That way, they won’t suspect fraudulent activity and suspend your account. You don’t want that when you’re in a foreign country.

Download a Converter App

If you want to make sure you aren’t getting duped at the checkout counter, download a currency converter app on your smartphone. With an app like XE, you can draw current market exchange rates while you’re connected to a Wi-Fi source or a cell network. The app then can store exchange rates that you can access for future reference even when your phone is offline.

It’s also worth noting that if you have an iPhone, your calculator app has a built-in currency converter. When you have the app open, click the calculator icon in the bottom left, flip the toggle that says “Convert,” then choose which currencies to convert between and type in the amount.

Bring a Debit Card

You’ll always need cash for certain purchases when traveling abroad, so it’s a good idea to bring a low or no foreign fee debit card with you. This will enable you to withdraw cash as needed and, by doing so, minimize the chance of getting pickpocketed as well as take advantage of the low exchange rate offered by Visa or Mastercard.

Dynamic Currency Conversion FAQ(2 questions)

Editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. Please keep in mind that it is not a financial institution’s responsibility to ensure all posts and questions are answered.

Upvotes

What is the difference between a foreign transaction fee and a currency conversion fee?

Ashley Wade, WalletHub Analyst

The difference between a foreign transaction fee and a currency conversion fee is that a foreign transaction fee is charged by a credit card issuer, while a currency conversion fee is charged by a card network or a merchant. Both apply to purchases made from merchants outside of the U.S.

If your card charges a foreign transaction fee, the card network's currency conversion fee is likely rolled into that foreign transaction fee. For example, a 3% foreign transaction fee might be comprised of a 1% currency conversion fee from the card network and a 2% foreign fee charged by your card's issuer. Issuers that don't charge foreign transaction fees may absorb the network's fee, effectively paying it for you.

Foreign Transaction Fees vs. Currency Conversion Fees

Charge	Foreign Transaction Fee	Currency Conversion Fee	Dynamic Currency Conversion Fee
Charged By	Credit card issuer	Credit card network	Merchant
When It Applies	Any transaction with a foreign merchant, including online transactions	Transactions made in a foreign currency	When a foreign merchant adds it to the transaction
Typical Cost	1.58% on average	Around 1-2%	Up to 7%

Keep in mind that foreign transaction fees apply not only when you use your credit card in another country, but also when you buy from a foreign business online. Fortunately, many cards don't charge foreign transaction fees, so they're easy to avoid.

If you travel abroad frequently, you should try to find a card like the Chase Sapphire Preferred® Card that doesn't charge a foreign transaction fee but does offer great travel rewards. In addition, make sure to watch out for dynamic currency conversion.

How to Avoid Dynamic Currency Conversion

While your foreign transaction fee is set by your card issuer and your card network has its own currency exchange rate, dynamic currency conversion is offered by the merchant when you're making a purchase, and the merchant sets the conversion rate. Card network guidelines require the merchant to ask you before engaging in so-called dynamic currency conversion, but unfortunately they don't always follow this rule.

If you are asked by a foreign merchant about converting your purchase to U.S. dollars, and you accept the offer, they will charge you an expensive currency conversion fee, up to 7% higher than the going conversion rate. If you decline the merchant's currency conversion offer and simply use your credit card to pay, then you'll pay the exchange rate set by your credit card network instead, which is typically the cheapest option available.

When buying from a merchant in a different country, you should check if your receipt is in U.S. dollars and request one in the local currency if it is. This can save you up to 7% on your purchase by letting you use your card's exchange rate rather than the inflated rate charged by the merchant.

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What is the most direct and fast way to change trxc into US dollars

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