Dynamic currency conversion

Dynamic currency conversion (DCC) or cardholder preferred currency (CPC) is a financial service in which Visa or MasterCard credit card holders, when making a payment in a foreign country, have the cost of a transaction converted to their home currency at the point of sale. DCC allows customers to see the amount their card will be charged, expressed in their home currency. DCC services are generally provided by third party operators in association with the merchant, and not by a credit card company. Credit card companies do not provide cardholders with a DCC option at the point of sale, and permit DCC operators to offer currency conversion in accordance with their card processing rules.

Without DCC, the currency conversion is done by the credit card company when the account is charged to the cardholder's statement. Even though the credit card company will publish the exchange rate used for conversion on the statement, they do not disclose the exchange rate used to convert a transaction at the time of payment. Both Visa and MasterCard state that the rates they publish in advance of a transaction posting to a cardholder's statement are indicative, since the rates they use for conversion correspond to the date and time they process the transaction, as opposed to the actual transaction date.

With DCC, the currency conversion is done by the merchant or their card processor at the point of sale. Unlike a credit card company, a DCC operator must disclose the exchange rate used for conversion at the time of the transaction according to credit card company rules which govern how DCC is offered. The DCC exchange rate must be based on a wholesale interbank rate, to which any additional markup is then applied. Visa requires this markup be disclosed to the cardholder. The credit card company may still charge an additional fee for charges made outside the card holder's home country, even when the transaction has been processed in their home currency with DCC.

Proponents of this service believe that customers can better understand prices in their home currency, and this makes it easier for business travelers to keep track of their expenses. They also point out that the customer has full transparency inclusive of conversion fees, and can make an informed choice whether or not to use DCC. The financial benefit to the merchant or their card processor may be an incentive for the merchant to offer DCC even when it would be disadvantageous to the customer.

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Wikipedia