Urgent Travel Warning on New Controversial Fees - Products News

ADVERTISING DISCLOSURE

ADVERTISING DISCLOSURE:
Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » News » Products » Urgent Travel Warning on New Controversial Fees

Urgent Travel Warning on New Controversial Fees

The content is accurate at the time of publication and is subject to change.

Global giant First Data Corporation announced this week that it`s partnered with AJB Software Design, Inc. to offer a new way for merchants to charge a Dynamic Currency Conversion (DCC) fee to consumers. AJB creates payment solution programs and First Data processes payments so the two of them will be able to provide merchants a new way to implement the DDC fee transaction when making sales to tourists or foreign travelers making purchases using a foreign credit card.

Many people, even frequent travelers, may be unaware of the dynamic currency conversion fee or may confuse it with a foreign transaction fee. DCC fee is a currency conversion convenience fee that is charged by merchants at the point of sale (POS). Here is how it`s supposed to work: when a credit card is scanned by a POS system, it picks up whether the card is foreign, and if it is, the merchant is prompted to ask whether the customer would like to pay for the purchase in their homeland currency. If the customer wants the charge represented in familiar currency, the merchant`s POS will convert the price to that country currency, right then and there, and will charge a DCC conversion fee, usually around 2.5 percent.

Foreign Fees and Dynamic Fees

A foreign transaction fee is charged to consumers by their credit card companies when they make a purchase in foreign currency and the credit card company converts the currency. The foreign transaction fee is usually between two and three percent, although some banks, like Capital One and Discover, charge no foreign transaction fee on any of their credit cards, making them a good choice for globe-trotters. When your card-issuing bank converts your purchase into US dollars, they usually give the best exchange rate, so even if they charge a foreign transaction fee it’s often the best deal.

The catch with opting to pay in home currency and paying the DCC fee rather than the foreign transaction fee is that unlike card issuing banks, merchants usually don`t give the best exchange rate. Also, if your card issuer charges less than a 2.5 percent foreign transaction fee, you`ll pay more when opting for a Dynamic Currency Conversion. Since the DCC transaction is being billed in home currency, no foreign transaction fee will be levied by the card issuing bank, so it`s a choice between the DCC and the foreign fee.

Here`s what a receipt using DCC looks like:

(click to view larger)

What Price Convenience?

The Dynamic Currency Conversion is often decried by fee watchdogs as an unnecessary charge that`s sneakily passed off on foreign consumers who may already be befuddled by making transactions in a different currency than they are used to. Opponents of the fee say that although it`s supposed to be optional, merchants often do not disclose it, slapping them with a higher exchange rate than they would have been given by their credit card issuer.

Proponents of DCC technology say that it provides a convenience to tourists and also saves them from unknown fees. With DCC, customers are supposed to be provided full disclosure and given the option of being charged in either currency. All charges for a DCC transaction are printed out on the receipt, along with the exchange rate. This takes the guesswork out of wondering what the exact exchange rate will be when the card issuer processes the charge, and what the foreign exchange rate will be, for card holders who don’t know. They say this protects consumers from being blindsided by fees and keeps transactions transparent.

Potential Revenue Stream

David Fish, senior analyst for the Mercator Advisory Group, says that “DCC provides an important value-added service and ancillary revenue stream for merchant service providers with strong presence in tourist and corporate travel destinations. It can also provide an attractive revenue stream for merchants that serve tourists, potentially offsetting a portion of their overall expense of managing the point of sale and the payment process.”

The US Department of Commerce estimates that there will be more than 81 million visitors to the United States between 2010 and 2016, resulting in millions of transactions which could potentially provide plenty of revenue for merchants who use the new DCC system developed by First Data and AJB Software.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:

Related News:

Are Consumer Reports “Best Credit Cards” Really the Best?
Are Consumer Reports Best Credit Cards Really the Best?

Posted: October 11, 2012

Consumer Reports Money Lab looked at 53 credit cards for their annual “Best Credit Cards” report and chose their favorite credit cards in three categories: cash back, travel rewards, and balance transfers – here, our editors analyze their... Continue reading
Priceline and Barclays Still Traveling Together
Priceline and Barclays Still Traveling Together

Posted: October 28, 2015

For many people nothing says discount travel better than priceline.com, except maybe earning rewards with the Priceline Rewards Visa card. Continue reading
New Travel Card From Synchrony Financial and Fareportal
New Travel Card From Synchrony Financial and Fareportal

Posted: August 23, 2016

People will soon have a new travel card available - the Synchrony Financial Fareportal credit card. The new co-branded credit card includes six months special financing, along with access to exclusive benefits and rewards at well known... Continue reading
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.
Earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to the quarterly maximum, each time you activate.
For Excellent, Good Credit
INTRO OFFER: Discover will match ALL the Miles you've earned at the end of your first year, automatically. For example, if you earn 30,000 Miles, you get 60,000 Miles. That's $600 towards travel!
For Excellent, Good Credit
Earn 2% cash back on purchases: 1% when you buy plus 1% as you pay
For Excellent, Good Credit
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!