also called DCC · currency conversion by merchant
When a foreign merchant or ATM offers to bill you in your home currency at a poor exchange rate.
When a foreign shop or ATM offers to charge you in your home currency instead of the local one, at a rate quietly worse than your bank's. It sounds helpful, seeing a familiar currency, but accepting it usually costs more, so the move is to always choose local currency. It is a separate charge from a foreign transaction fee, which your own bank adds; this is the merchant's rate trick at the point of payment.
Someone paying at a foreign terminal is asked whether to be charged in their home currency or the local one, and taps home currency because it feels safer. The machine applies a poor rate, and they pay more than if they had chosen local currency and let their own bank handle the conversion.
Accepting it usually costs more than letting your bank convert, so nomads always decline and pay in local currency.
The difference is the whole point, so here is each one in a line.
Foreign exchange is converting one currency to another, and the mid-market rate is the true midpoint before anyone adds a markup.
A foreign transaction fee is a charge your card or bank adds for spending in another currency, and dynamic currency conversion is the trap where a foreign shop or ATM offers to bill you in your home currency at a deliberately poor rate, which you should decline.
A new term lands on this site every day, and the email is how you get it the day it lands. No digest, no roundup, no pitch. One term, what it means, and what it costs you to get it wrong.
Unsubscribe in one click, any time. We do not sell or share your address.