Understanding Dynamic Currency Conversion

Separating rumor from reality

Dynamic Currency Conversion (DCC) sometimes referred to as Cardholder Preferred Currency (CPC) has been around for sometime, but there is a good deal of misunderstanding, hype, misinformation, opinion and mystery around its benefits and its detriments.

DCC is a service that allows credit card holders to pay for goods and services internationally with their local currency. For example, a United States credit card holding citizen might be traveling in East Africa and opt to use his or her credit card to pay for a hotel stay; with DCC, the card holder is given the option to pay the bill in US dollars rather than the African currency correspondent to the country they happen to be traveling in. For the cardholder traveling in Africa, this can be extremely convenient given that, at present, there are at least 53 different types of currencies throughout he African continent.

The DCC feature is only available for Visa and MasterCard, as American Express provides for multi-currency transactions as part of its basic service.


How Dynamic Currency Conversion Works:

  • The cardholder presents his or her card at the point of sale (POS) for payment.
  • The POS device detects that the credit card is a card was issued in some other country.
  • The attendant asks the cardholder if he or she prefers to pay with the card issuing country’s currency, or the local currency, and the cardholder is allowed choose.
  • If the cardholder prefers his home currency, the POS device converts the sale price to the preferred currency, based on the current exchange rate.
  • The cardholder signs a receipt that shows the sale amount in local currency, the exchange rate and the final amount charged in the currency of the card issuing country.
  • The DCC service ensures that the cardholder will be charged the correct amount in his home country’s currency and that the merchant receives the correct amount in the local currency.
  • Sometimes, but not always, the issuing credit card company imposes an additional foreign transactions fee. Every card issuer has different regulations regarding additional foreign transactions fees.

DCC allows for certain benefits to all three participants in any International credit card transaction; the Merchant, the Cardholder and the Local Acquiring Bank or Payment Gateway.

non DCC transaction flow chart


Non-Dynamic Currency Transaction Flow Chart



DCC transaction & credit card processing flow chart


 Dynamic Currency Transaction Flow Chart


Benefits to the Merchant

  • Better customer service benefits by allowing use of local currency
  • Earn profits, if any, from a portion of the foreign exchange margin typically appropriated by the MasterCard or Visa schemes and the foreign issuing bank
  • Reduced chargeback risk


Benefits to the Cardholder

  • Clear understanding at the point of sale, during the transaction, of the exact amount to be charged in their local currency
  • Foreign exchange margins normally applied by Visa, MasterCard and Issuing banks will often be waived
  • “Best rate” guarantees


Benefits to Acquiring Banks and Payment Gateways

  • Additional profit stream
  • Better commercial service offers for merchants
  • Reduced foreign exchange risk (FX) exposure


What does the future hold for DCC?

According to a study done by PSE Consulting, a leading payment and technology consultant, cardholders seem to prefer the option of DCC, despite press coverage that runs the gamut from suppliers that sing its praises to International journalists who write “travelers be warned” kinds of opinion articles.

Recent modifications to the regulation of International Visa and MasterCard card schemes lend an increased amount of transparency to the practice of DCC use, as previously transactions did not require the disclosure that the transaction was being converted to the card issuing home currency, a process that is known as “back office DCC”. In addition to increased POS availability of DCC, it is likely that very soon the same will be true for ATM transactions. Likewise, new POS and ATM solutions are constantly being delivered that are fully Europay, MasterCard and Visa (EMV) compliant, and so will give clear onscreen explanations of the offer in the cardholders language, thus reducing the risk of non-compliance with DCC rules and regulations by merchants due to lack of training or language barriers.



Eran Feinstein is the founder of Direct Pay Online. Direct Pay Online provides global e-commerce and online payments solutions for the travel and related industries  He is a leading authority in the fields of e-commerce, travel and payments, having acquired extensive experience from various parts of the world.

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