Pay in local currency – stop using DCC

It’s the shopping season again and luckily for me, this year, I’ve been spending less. In this post, I’ve decided to address a common tactic that online merchants have been using to rob you without your knowledge. Spend 5 minutes of your time reading this and you may save hundreds next time you shop online 🙂

Ever shopped online and get slapped with a DCC fee on your credit card statement, and wondered what that crap is and how you got it? You’re not alone – millions of consumers have been scammed and ripped off by that unwanted charge on their credit card for many years.

How DCC arises from harmless shopping

Let’s say you’re shopping on Amazon or Target in the US and you check out your Black Friday loots and are asked whether you would want to pay in US$ or S$ (your local currency), which would you pick?

The default option is S$, which was probably auto-generated based on the check out screen. Thinking that you won’t get a bill shock when you bill arrives – you pick that option.

That’s how you get ripped off

The dynamic currency conversion (DCC) fee is a basically an added convenience fee imposed by the payment processor or merchant. The convenience is letting you, the consumer, know exactly how much you are paying in your local currency at the point of purchase.

But, by accepting to pay in local currency, you allow the merchant to impose an additional charge to the foreign exchange rate at the point of purchase, with the profit margins split between the payment processor and merchant. The rate is usually unfavourable to you and sometimes, you don’t even have the option to say no.

This convenience fee is usually between 2-3% of your checkout value, and while to some people, that may seem like a small figure, imagine how much it can add up from spending thousands of dollars over the years. From the merchant’s perspective, when millions of customers shop on their shop each day, these small 2-3% add up quickly to provide an extra revenue stream with little or no work! Of course they are incentivised to play this game with you.

In short, always choose to pay in foreign currency when shopping on overseas websites. Knowledge of this outrageous scam can prove to be useful if you’re trying to cut your spending for free.


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