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When travelling abroad we often face many choices, but they are usually related to things that we are used to dealing with. Deciding where to stay, what restaurants to eat at, and how we are getting there, are among the most frequent decisions we make while on a trip.
Usually, choosing how we pay is a relatively easy thing to do. For convenience, particularly when travelling on business, we tend to use our debit or credit cards. These pieces of plastic allow us to buy almost everything we need (and in the case of credit cards, have the credit line for). They are accepted in most places and are secure.
Paying with a card is something we do effortlessly. We’ve been doing it for years and we are quite used to the normal procedures we need to follow. Handing over our credit card to pay is nowadays – for some of us – almost like a reflex.
And then suddenly, while travelling through Singapore, someone asks you: “Would you like to pay in Euros or in Singapore dollars?”
What should you answer?
You are being offered a service called Dynamic Currency Conversion or simply DCC. This service allows the traveller to pay either in the original pricing currency (e.g. Singapore dollar if we continue with the example) or in the cardholder’s home currency - in this case, the Euro.
So, what’s the difference?
When a traveller chooses to pay in her home currency, she will know exactly how much she's going to pay for the purchase, including the exchange rate that will be applied. There are no surprises when the credit card statement is received at the end of the month. When you are presented with the offer, what you see is exactly what you will pay, presented to you in the currency that you understand.
If the traveller declines the offer, the payment is made in the traditional way. The traveller’s issuing bank will inform her how much she'll have to pay once the purchase has been converted to the home currency applying the exchange rate.
You may encounter this service in different channels, but the most common ones are in the travel merchant’s Point of Sale devices and its website. In both cases, the traveller is presented with all the information required, including the exchange rate applied for the conversion.
What’s better for you?
To make a proper comparison, you need to read your card’s Terms and Conditions (T&Cs) to identify how much they charge for commissions on foreign exchange (FX) conversions. You will be surprised to find that in most cases, the rate offered by the merchant is equal or even more competitive than the rate applied by the card issuing bank.
On top of that, knowing exactly how much you are going to be billed in your home currency when making the purchase is very helpful, particularly when you have to reconcile payments or report expenses.
We’ve already taken the initiative to create a world class multi-currency payment solution through our recent partnership with Continuum and RBS FXmicropay™ – so at the end of the day travellers will be the ones who decide how to organize their finances without increasing travel cost.
It’s your choice. Happy travelling and let us know what you think by leaving a comment below.