By Lillah Grey September 13, 2025
Dynamic Currency Conversion (DCC) can make shopping easier for international customers by letting them pay in their own currency. But it also comes with extra fees and potential confusion. In this article, we’ll explore whether merchants should offer DCC and what are the factors to consider before using it.
How Does Dynamic Currency Conversion Work?
Dynamic Currency Conversion (DCC) assists cardholders in knowing the value of a transaction in their home currency immediately, making it simpler to be aware of how much they are spending.
When a consumer makes a purchase with a foreign credit or debit card in a store or from a website, the system identifies the place the card is issued from. It then presents the customer with the option of paying in their local currency, displaying the total amount along with the exchange rate and any additional charges.
The customer has the option of either accepting this offer and paying in their currency or rejecting it. For companies, DCC is a source of additional income via fees or commissions. Financial institutions and banks determine the exchange rates and add a markup, also to their advantage. DCC technology makes it simple to identify foreign cards and make real-time conversion available at in-store and online checkout.
For example, an American visitor in Italy may have a €100 purchase converted to US$120 at checkout. They can then choose if they want to pay the same amount in dollars or remain with euros, whichever suits them best.
Currency Conversion and Exchange Rate
When a traveler selects to pay in their local currency, the payment processor or merchant determines the exchange rate on that transaction. This rate is typically provided by the card network, such as Visa or Mastercard, but it may not always be as favorable as the rate the customer’s bank would provide.
In addition to the exchange rate, DCC transactions typically include a markup or conversion fee. This additional fee is how the processor or merchant gets compensated for providing the service. Unfortunately, some companies do not fully disclose these additional fees, which can be confusing for clients and make it difficult for them to understand the true cost of their purchase.
Dynamic Currency Conversion Vs Traditional Currency Conversion
Dynamic currency conversion (DCC) and static currency conversion are two methods of dealing with payments when customers pay with a card from a foreign country. They operate differently with regard to the exchange rates, charges, and how much customers are aware of how much they are paying.
In DCC, the exchange rate typically contains an additional markup by the business or service provider, which accommodates the conversion charge and includes a small profit. This is costly, as customers usually end up paying more than they would if the conversion were done traditionally.
Conversely, with conventional conversion, the exchange rate is determined by the customer’s bank after the transaction and is typically closer to the actual market rate, although banks may charge an additional foreign transaction fee.
With regard to customer experience, DCC allows consumers to view just how much they’re paying in their own currency immediately. This can be beneficial, particularly if they prefer not to be surprised down the line.
However, since the rates and charges are higher, they will wind up paying more. It has been indicated that customers using DCC could pay anywhere from 2.6% to 12% more. Classic conversion doesn’t provide that initial certainty, but it may save customers money because the exchange rates are usually more favorable, even if they won’t know the total amount immediately.
For companies, DCC can be a means of making additional funds by charging commissions or fees, and it may make customers feel more at ease by providing them the options of their local currency.
But it is not always simple to implement because it takes additional technology and international rule compliance. Some customers may also not think the extra cost is reasonable. Traditional conversion is easier to handle and prevents those added steps, but it doesn’t generate additional revenue as DCC does.
Therefore, while DCC provides transparency and additional revenue, it can cost a lot and can be more complicated, while conventional conversion is simpler and perhaps less expensive for customers, but it does not have instant pricing information. Both have benefits and pitfalls based on what companies and customers require.
How to Avoid Dynamic Currency Conversion Chargebacks
To prevent dynamic currency conversion (DCC) chargebacks, make sure you comply with Visa and MasterCard guidelines. You should clearly indicate to the customer the exchange rate used and any additional charges. You should also always give them a choice whether or not to use DCC.
Ensure you don’t automatically charge DCC on all transactions. Ask customers first and always remember to never force them. When you provide DCC, show them the total price in their local currency, including any markup or fees, so they aren’t surprised down the line.
It’s also very important to train your staff well. They should understand how DCC works and explain it properly to customers. By being careful, educating your team, and sticking to the rules, you can build trust and avoid chargebacks related to currency conversion.
Benefits of Using Dynamic Currency Conversion for Businesses
DCC provides companies the opportunity to deal with overseas consumers by providing them the options to pay from their local currency. For foreign consumers, it makes purchasing easier by allowing them to view prices immediately and make payments in their own local currency.
This way, they don’t have to do any calculation for their conversion rates or have to be concerned about any surprises at a later time.
It’s also more comfortable for many customers since customers are reassured when they know exactly how much they’re paying. Knowing the total amount before they pay prevents them from worrying about confusion or hidden bank charges later, which means that shopping is much easier and less stressful.
Another advantage of DCC is that it’s very transparent. The exchange rate is very clearly displayed when the transaction is made, so that customers can see precisely what they’re being charged. This assists them in making a quick decision on whether to proceed with the DCC service or retain their bank’s exchange.
Even when there is a minor markup, consumers are well aware of it and can make an informed decision, rather than getting hit later with concealed charges. DCC facilitates simpler cost comprehension and a sense of control at checkout for customers. For companies, DCC is an excellent means of generating additional revenue via conversion charges or markups.
It also enhances customer service by providing a convenience value-added option of payment so that consumers can feel comfortable with their payment method, particularly in sectors such as tourism, online purchases, or travel. By providing DCC, companies are able to differentiate themselves from others and gain more foreign customers.
It even assists with accounting since transactions are already processed in the home currency, which avoids the use of time and the inconvenience of having to convert foreign sales later. Generally, DCC assists companies in generating a smoother, more easier experience while increasing their bottom line.
Challenges of Dynamic Currency Conversion
Although dynamic currency conversion (DCC) offers some useful benefits, it also possesses some challenges that both consumers and companies need to remember. One of the major problems is that there is a higher price for customers.
Exchange rates utilised in DCC tend to add additional markups, increasing purchases above the prices charged by banks. Most customers are unaware of this and may proceed with using DCC without being aware that they are overpaying.
The other issue is with transparency and consent. Occasionally, the charges and exchange rates aren’t detailed to consumers, and this can cause confusion and frustration. In a few instances, consumers are enrolled in DCC automatically without consent, which is ethically wrong. Companies must ensure consumers know what they are being offered and that they consent to using DCC instead of it being used without their knowledge.
For companies, DCC presents additional challenges such as strict regulations and technical barriers. Compliance with international regulations takes time, and exchange rates fluctuate continuously, so the exchange rates must be refreshed frequently. Merging DCC with current POS systems and managing multiple currencies can also make accounting time consuming.
When customers believe they have been deceived, it can damage the reputation and loyalty of the business. That’s why staff and customer education is critical. Also, companies that rely significantly on foreign visitors or international e-commerce or other business may suffer during off-peak periods when there are fewer international consumers. Knowledge of these challenges enables companies to make better choices when providing DCC.
Best Practices for DCC
First, there should be regulatory compliance — you must adhere to local and foreign legislation regarding currency conversion and payments. It is also essential to keep employees well-trained, educating them on how DCC functions, what its benefits are, and how it impacts customers. Well-trained employees can comfortably explain DCC and make customers feel at ease when opting for it.
The same goes for honest and transparent communication with customers. Offer them the choice to pay in their currency or in the local currency all the time during international payments. Don’t charge DCC automatically without querying. Let them know clearly what DCC entails and how rates and charges operate. Displaying exchange rates upfront enables customers to make a wise decision and trust you.
Fair prices and clever technology should be used by businesses, too. Genuine competitive exchange rates and moderate fees increase the propensity of customers to accept DCC. The incorporation of DCC into payment systems needs to be smooth, and data security should be at par with industry standards such as PCI DSS.
Regular checks assist in identifying problems, while analysis of customer complaints and transactional data enhances services. Providing customer support and contextual promotions may enhance customer satisfaction. Staying updated on market changes and choosing reliable partners ensures you’re always ready to offer DCC which is safe, fair, and easy to use.
Conclusion
Dynamic Currency Conversion can be a helpful tool for businesses that serve international customers, but it’s not without its challenges. Merchants should carefully weigh the benefits, like convenience and extra revenue, against the potential drawbacks, such as higher costs and customer confusion.
By being clear, sticking to best practice, and informing customers, companies can provide DCC in a manner that is fair and improves the shopping experience. Finally, whether to permit DCC depends on the aims of the business and its clients base, but with the right approach it can be a useful option.
FAQs
What is Dynamic Currency Conversion (DCC)?
DCC is a facility that allows consumers to pay in their local currency when abroad, and the exchange rate is used at the point of purchase.
Should merchants promote DCC to customers
Depends—DCC can be more convenient but will cost more, so merchants need to be clear and allow the customer’s various options for payment.
How are exchange rates calculated under DCC?
The fee is determined by the payment processor or card network and usually consists of a markup over interchange rates.
Is it possible that DCC results in hidden fees?
Yes, some merchants don’t make markups or charges entirely clear, so it’s a good idea for customers to check terms first before accepting DCC.
How can a merchant avoid chargebacks on DCC?
By clearly disclosing rates, offering multiple options, and training staff to follow best guidelines, merchants can reduce the risk of disputes.
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