The Hidden Costs of Card Payments Abroad

Many individuals do not exchange currency before going on vacation abroad, instead paying for most expenses with a card or withdrawing cash on-site. This convenience, however, may come with a hidden cost due to a service known as DCC, or Dynamic Currency Conversion.

The encounter with DCC often happens at the point of purchase, when the merchant shows you the terminal and asks you to choose whether you want to pay the amount in your currency or in the currency of the country you’re in, such as euros. While using your home currency may seem tempting, choosing the local currency is usually more beneficial.

If you choose to pay in your home currency, the DCC exchange rate is applied, which is determined by the terminal operator. According to Filip Hrubý from Česká spořitelna, this rate is usually less favourable than the rate provided by the customer’s domestic bank.

Fees at terminal operators are typically five to fifteen per cent worse than at Czech banks, according to Michal Kuzmiak from Air Bank. Tereza Kaiseršotová from Raiffeisenbank puts the range between two and ten per cent.

The same can happen with ATM withdrawals. “Some ATMs abroad may also charge usage fees. Those that do not charge fees should be labelled ‘no fee’ or ‘free of charge’,” warns Michaela Průchová from ČSOB. She advises people to find out in advance what fees their bank charges for withdrawals abroad.

Filip Hrubý, however, warns against automatically dismissing DCC. “It can be advantageous when withdrawing money in exotic destinations, where the exchange rate between the local currency and the koruna is calculated through several currencies,” he said. In Japan, for example, this means converting from koruna to the euro, then from the euro to the British pound, and finally from the British pound to Japanese yen. “For the average customer, it’s very complicated to calculate the exact amount in koruna that will be deducted from their koruna account after withdrawing yen in cash,” he added.