Why paying by card in the local currency always works out cheaper, and what DCC is

My advice for paying by card abroad is simple: always choose the local currency. Pick your home currency and the terminal switches to dynamic currency conversion (DCC). The rate is worse, so you pay more. Choosing the local currency saved me money even on an ordinary coffee at a Czech motorway service station.

Quick factsby Milan Bez Mapy

My experience

For a coffee on a Czech motorway, the terminal offered me €9.20; paying in crowns, I was charged €7.87

What to press

‘Without conversion’ or ‘In local currency’; if the merchant pushes you towards euros, say no

Watch out for

Petrol stations and tourist attractions, where the DCC rate is usually the worst

How to spot DCC

Since April 2020, EU terminals must show the mark-up over the ECB rate; if you see one, choose the local currency

Bank fees

Your bank may charge a fee when you pay in a currency other than the euro, so check its list of charges before you travel

Paying by card in the local currency always works out cheaper, but do you know why? Last time it saved me a respectable sum at a Czech petrol station, simply because I knew which button to press on the card terminal. Abroad, the terminal will often ask whether you want to pay in your home currency or in the local one.

It looks like a minor detail, but this choice can make a real difference to what you actually pay. You may have assumed that paying in your home currency abroad is often the better deal. In practice, it’s usually the other way round. This article is part of my Milan Busts Myths series.

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Why paying by card in the local currency saves you money

I was on my way from Prague and stopped at a motorway service station for a coffee and a biscuit. At the till, the card terminal gave me two options: pay CZK 197 or €9.20. I know that paying in the local currency always works out cheaper, so I chose Czech crowns. Plenty of people underestimate this choice, though, even experienced travellers.

Later I checked in my banking app what the payment had actually cost me. To my surprise, it was only €7.87. That one simple choice saved me €1.33. The difference made me curious, so I went looking for the reason.

What is dynamic currency conversion (DCC)?

Dynamic currency conversion (DCC) is a service that lets customers pay in their home currency. On paper that sounds practical: you know exactly how much you’ll pay. The catch is that DCC uses very poor exchange rates and often comes with high fees. At first it may look as though you’ll pay exactly the amount shown on the terminal, but that often isn’t the case.

Merchants who offer DCC earn a commission on it, which is why they’re so keen on it. Petrol stations and tourist attractions usually have the worst rates, so choosing your home currency there is the worst choice you can make.

Merchants will often push you to take this option. It may seem simpler, but the final price will always be higher than if you’d paid in the local currency. If a merchant switches the payment to your currency automatically, without giving you a choice, that’s unethical.

The EU has had a rule on this since April 2020. Before a DCC payment, card terminals and ATMs must show their mark-up over the European Central Bank’s reference rate as a percentage. If you see a mark-up like that on the screen, it’s a clear signal to choose the local currency.

How to save money when you pay abroad

The simplest way to avoid losing money for nothing is always to pay in the local currency. When you pay by card, read carefully what the terminal is offering and choose ‘Without conversion’ or ‘In local currency’. If the merchant doesn’t explain why you should pay in euros or another home currency, I’d simply say no and insist on paying in the local currency.

These small steps can spare you needless fees and poor exchange rates. If the merchant doesn’t ask and picks your home currency automatically, ask them to change it or consider paying another way. Being naive is the worst mistake you can make here, because money changed behind your back can cost you dearly.

Watch out for extra bank fees on card payments abroad

• TIP: When you pay by card abroad, watch out for bank fees that may apply. Besides charges for cash withdrawals from ATMs abroad, banks often charge for the card payment itself. The fees depend on your bank and type of card, and you won’t always see them at the moment you pay.

On card payments abroad, your bank may add a further currency conversion fee if you pay in a currency other than the euro. There may also be foreign transaction fees, which vary from bank to bank. That’s why it’s worth checking these fees in advance, so you don’t pay more than you need to.

If you want to keep these fees down, some banks offer cards with no fees on foreign payments, or with better terms. It always pays to compare the options before a trip and pick the best one.

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Watch out for DCC and card fees abroad

Dynamic currency conversion is a common way for customers to lose money without even noticing. Choosing the right option on the terminal, though, can add up to a real saving, like mine on the Czech motorway. You can spend it on something better, such as a nicer coffee or a souvenir. After all, travel is about experiences, not needless fees.

So next time you pay by card abroad, remember: always choose the local currency. It can bring you not just better value for money but also the sense that you’re getting the hang of managing money smartly on your travels.

Paying by card in the local currency and DCC: FAQs

Is it better to pay by card in the local currency or in euros when abroad?

In the local currency. If you choose euros on a terminal abroad, the payment goes through dynamic currency conversion (DCC) at a worse rate. You end up paying more than if your bank or card company had converted the amount.

What is DCC when paying by card?

DCC, or dynamic currency conversion, is a service where a terminal or ATM abroad converts the amount into your home currency for you. The merchant earns a commission on DCC and the rate is usually much worse, so it’s better to decline DCC and pay in the local currency.

In the Czech Republic, should I pay by card in crowns or in euros?

In crowns. Card terminals in the Czech Republic often offer you the amount in euros as well, but that payment goes through dynamic currency conversion (DCC) at a worse rate. Paying in crowns, I was charged €7.87 for a coffee on a Czech motorway instead of the €9.20 I was offered.

How can I tell if a terminal is offering me DCC?

A terminal or ATM with DCC offers you the amount in your home currency, euros for example, alongside the local currency. In the EU, it must show you, before you pay, the DCC mark-up over the European Central Bank’s reference rate as a percentage. This rule has applied since April 2020, and a mark-up like that is your signal to choose the local currency.

Does my bank charge a fee for card payments in a foreign currency?

Yes, some banks add a currency conversion fee or a foreign transaction fee when you pay by card in a currency other than the euro. The amount varies by bank and type of card, so check your bank’s list of charges for card payments in foreign currencies before you travel.

I’ve picked apart another travel myth in my article 4 myths about buying cheap flights that people believe in 2023.

Happy travels!
Milan