Dynamic currency conversion: why you should always pay in local currency

Abroad, a card machine or ATM will sometimes ask which currency you want to pay in: the local one, or your home currency. The second option is dynamic currency conversion, and the conversion is done by the shop's or ATM operator's payment provider at its own rate, not by your bank. The standard advice from both card networks is to decline it.

It applies to anyone paying with a card outside their home currency area, whatever the card brand. The price the shop sets does not change. What changes is who converts it and at what rate. Everything below was read on 2 October 2026.

There are two ways a foreign payment can be converted. In the ordinary route, the payment arrives at your bank in the local currency, and your bank converts it using its own rate and charges whatever fees your card terms say. In the DCC route, the terminal or ATM offers to do the conversion first, so the amount that reaches your bank is already in your home currency.

Visa describes it the same way: if a merchant offers DCC, you may be given the option to pay in your home currency, "which includes exchange rate and additional fees". The same offer can appear at an ATM, where you withdraw local cash but are billed in your home currency. Mastercard's help page says merchants and ATM operators may offer to convert the foreign price to your home currency, and that this "comes at a cost and incurs additional currency conversion fees". Both networks say the best practice is to let your own bank do the conversion and decline the offer.

The offer looks helpful because it shows a familiar number. That number is not free information. It comes with a rate, and the rate is the part to read.

Two terms are used below. The local currency is the one the payee uses, such as euros in Spain. The billing currency is the currency of your card account.

The figures in this section are an illustration with assumed numbers. They are not real quotes, not a measured market average and not a forecast for any card. The only point is to show how a mark-up turns into money.

Assumptions:

• A reference rate of 1 euro = 1.10 US dollars. This is made up and rounded for easy arithmetic.

• A restaurant bill of 250 euros and an ATM withdrawal of 300 euros.

• Your card's issuer converts at the reference rate and adds a 3% foreign transaction fee. Your card may have no such fee, or a different one.

• The terminal offering DCC applies a 5% mark-up over the reference rate for the card payment and 7% for the ATM withdrawal, with no further fee from your issuer on a payment that arrives already in your billing currency. Real mark-ups vary by provider and your issuer's terms vary by card.

In this example, accepting DCC on the meal costs $5.50 more than letting an issuer with a 3% fee convert it, and $13.75 more than a card with no foreign fee. On the withdrawal the gap against the same 3% card is $13.20. If your card charges no foreign transaction fee, the gap is wider, and if your issuer's fee is higher than the terminal's mark-up, DCC could come out cheaper.

So the way to know is to compare two percentages: the mark-up the terminal discloses and the cost of your issuer's conversion. The next section covers where the terminal's number comes from.

The main text is Regulation (EU) 2019/518, which amended the cross-border payments Regulation (EC) No 924/2009 and added Article 3a. It covers payments in euro or in another EU member state's national currency that involve a currency conversion service.

The reference rate is the ECB's. The ECB publishes euro reference rates for a set of currencies at around 16:00 CET on working days, and says the daily concertation they are based on normally happens around 14:10 CET. The ECB also says the rates are published for information only and that using them for transaction purposes is strongly discouraged. So the mark-up is a yardstick for comparison. It is not a rate anyone is promising you. The regulation's recitals add that a conversion between two non-euro currencies might need a rate derived from two ECB rates.

Read that as a list of things you are entitled to see: both amounts, the mark-up as a percentage over the ECB rate, and a statement that paying in the local currency is possible. A receipt or e-mail showing both amounts is the durable record. The recitals say the same in plainer words, and add that it should be possible to refuse the service and pay in the payee's currency.

Your own bank has duties too.

Two limits are worth knowing. First, Article 3a is about disclosure. It does not set a ceiling on the mark-up, and Article 3(4) says the equal-charges rule for cross-border euro payments does not apply to currency conversion charges. A high mark-up that is displayed correctly is allowed. Second, this is EU law about conversions involving euro and other EU currencies. We could not confirm from the sources read here how far it reaches for a card issued outside the EU, or what applies in countries outside the EU such as Japan or Thailand. In those places the card-network rules below are the clearer guide.

The steps are the same in every country. The wording on the machine changes.

At a card terminal

1. Wait for the currency choice. On some terminals it comes before you tap or insert the card, on others after. If the terminal asks for the card before showing the amounts, ask staff to show them. 2. Read the two amounts and the currency symbols. One will be the local currency, one your home currency. A mark-up percentage should appear next to the offer, as the rules above require. 3. Choose the local currency. If you are unsure which option is which, the currency symbol decides: pick the one in the payee's currency. 4. Do not hand the card over for someone else to choose. Visa says merchants must not choose on your behalf. If a terminal is carried away from the table, say before it leaves which currency you want. 5. Check the printed or e-mailed receipt before you leave. It should show the local-currency amount. If it shows your home currency with a conversion rate, DCC was applied.

If staff say your bank will charge more, check that claim yourself: the comparison is the terminal's disclosed mark-up against what your issuer charges. Visa says that if you feel pressure, you should decline.

At an ATM

1. Insert the card, enter the PIN and the amount in the local currency. 2. Watch for a screen that offers to continue "with" or "without" conversion, or to show the amount in your home currency. Wording varies by ATM operator. The machine must show its mark-up and tell you that you can have your own bank convert instead. 3. Decline the conversion and continue in the local currency. 4. Take the receipt. It should show the local-currency amount that the machine dispensed.

Mastercard adds that using a credit card at an ATM is treated as a cash advance, with the highest fees, possible effects on available credit and finance charges that may begin immediately. Its advice is to use a credit card for a foreign ATM withdrawal only if it is your only option. That is a separate cost from DCC, so check your card's terms before you travel. For where ATMs take foreign cards in one country, see Money in Japan.

Online and at hotel desks

The same rule applies on a checkout page or at a hotel desk: pick the merchant's currency, not yours. Recital 8 of Regulation 2019/518 says the information should appear on screen for online purchases as well. A hotel front desk is a common place to be asked, so look at the printed folio and the terminal screen together. City taxes billed at checkout are covered in our guide to tourist taxes in Europe.

Start with what you have. Compare the receipt and the amount on your card statement or app. If the receipt shows your home currency, a rate and a mark-up, DCC was applied and, if you tapped to accept, you agreed to it.

1. Ask the merchant on the day. If the receipt was printed, staff may be able to cancel or reverse the payment and run it again in the local currency. Some will, some will not, and the shop is not obliged to. Ask before you leave the premises. 2. Contact your card issuer. Mastercard says disputes go to the issuer of your card, which is the only party that knows what rights your account has. Visa tells cardholders to report an incident where the details were missing or they felt pressure to your issuer. Give the date, merchant, both amounts and what the terminal screen showed. 3. Keep the paper. The receipt is the durable medium the EU rules mention. Photograph it and the terminal screen if you can. 4. Know what a dispute covers. In the United States, the CFPB says a credit card billing-error dispute starts with a call to the card company, followed by written notice within 60 calendar days after the charge appeared on the statement. The company then has 30 days to confirm it received the notice. The CFPB page does not discuss DCC, so it does not tell you that a DCC charge counts as a billing error. Outside the US, ask your issuer for its own deadline. 5. Expect a mixed result. A charge you accepted on the screen was authorized. Issuers decide on the facts: was the choice presented, were both amounts and the mark-up displayed, or did the terminal choose for you. A DCC charge that was shown correctly and accepted is the weakest case, and a charge where you were never given the choice is the strongest.

This is general information about how card disputes work, not a prediction for your card or your country. Your cardholder agreement and your issuer's dispute team set the actual rules.

• Find your issuer's foreign-currency terms: the conversion fee, and for EU-regulated providers the published mark-up over the ECB rate.

• Know which of your cards charges a foreign transaction fee and which does not, so you know what the terminal's mark-up is being compared with.

• Decide at home to pay in the local currency by default, so the decision at the counter is not a new one.

• Keep a second payment method in case a terminal will not take your card.

• If your bank sends a message about conversion charges after each foreign payment, read it. Under Article 3a(5) it is meant to tell you the mark-up, and you can opt out of the messages if you do not want them.