Using a credit card abroad? Pay in the local currency

International travel is fun and exciting, but it isn’t cheap. According to the U.S. Travel Association, the cost of traveling rose by more than twice the general rate of inflation over the most recent twelve-month period. After you’ve shelled out for airfare, hotels and other major expenses, the last thing you need are hidden costs adding to the price you pay every time you use your credit card.

When you use a credit card in a foreign country, you have a choice between paying in the local currency or in U.S. dollars. You might be inclined to choose the familiarity of U.S. dollars, but that’s a choice that can cost you.

The reason is something called dynamic currency conversion. This allows you to have transactions immediately translated to U.S. currency when you pay for them. However, this can add an extra cost to the transaction. If you incur that extra cost every time you pay for something while traveling, it can add substantially to the cost of your trip.

This article can help you avoid that extra expense. It will explain dynamic currency conversion so you know why and how to avoid it.

What is dynamic currency conversion (DCC)?

Dynamic currency conversion (DCC) is a process that instantly converts transactions from the local currency to your home currency. So, if you’re an American travelling abroad, DCC will allow you to pay for things with your credit card in dollar terms rather than in a less familiar currency.

A transaction using DCC would show the cost both in the local currency and then in dollar terms. It might also show the conversion rate used to translate the cost from the local currency into dollars.

On the surface, this can seem like a terrific convenience. Having your transactions instantly translated into dollars might help you keep a better handle on your expenses while you travel. The drawback, though, is that DCC can also repeatedly add to those expenses. That added cost is on top of any foreign transaction fee your credit card might charge.

Why paying in USD can cost you more

In theory, paying in U.S. dollars or in the local currency should amount to the same thing in the long run. In real life, though, when and how that conversion takes place can make a big difference.

When you’re in a foreign country and pay for something with a U.S. credit card, the cost is going to be translated to U.S. dollars at some point. After all, your card balance is in U.S. dollars, so your credit card company would translate any transactions from foreign currency to dollars before adding it to your balance. With DCC, you can have that currency conversion happen right when you pay for something.

That has the benefit of letting you see your transactions in dollar terms as you’re paying for things. However, this convenience might not be worth the added costs.

Merchants set the exchange rate

One possible source of added costs is the exchange rate used to convert the local currency into dollars. Major credit card companies will typically use a competitive market exchange rate when they convert foreign transactions into dollars to add them to your credit card balance.

With DCC, the currency conversion takes place at the point-of-sale. You’ll get to see the cost in dollar terms, rather than in just the local currency.

However, the merchant (or more accurately, the merchant’s payment system provider) gets to choose the exchange rate. They often build a mark-up into that rate. That mark-up can add as much as 3% to 5% to the cost of your transaction.

Additional conversion fees may apply

That currency markup isn’t the only cost when you pay using DCC. The payment processor might also add a fee for the service.

Note that even if your credit card doesn’t charge foreign transaction fees, you would still incur these DCC costs. Those costs are added by the merchant’s payment processor, not by your credit card company.

Why paying in local currency is usually better

At first, it may be a little confusing to pay for things in a foreign currency. However, if you have a rough idea of what the exchange rate is, you can have some sense of what you’re paying. The benefit is that by paying in a foreign currency, you’ll probably pay less than if you use DCC.

Visa and Mastercard typically offer competitive exchange rates

As mentioned previously, the currency has to be converted at some point — either at the point of sale, or when the credit card company adds the transaction to your account balance.

The difference is that major credit card companies usually base the conversion on more competitive market rates. The rates used for DCC are more variable, and often significantly higher.

You keep more money in your pocket

The cost of using DCC for some transactions might seem fairly minor. However, if you incur these costs every time you use your credit card, it can add substantially to the cost of a trip.

Suppose DCC adds 3% to the cost of every transaction. Let’s look at how this can affect the cost of a typical day on vacation. For the purpose of this example, the costs are shown in dollar terms, to demonstrate the impact of DCC on the total cost to you:

A real-world example of DCC vs. local currency

To take a deeper dive into the currency exchange cost, let’s look at what it would cost in dollar terms to pay for something priced at 100 euros:

• As of mid-August, 2026, the exchange rate was about 0.863 euros to 1 U.S.dollar
• At that rate, it should take about $115.87 to buy something worth 100 euros
• However, conversion using DCC could give you a less favorable exchange rate of 0.849 euros to the dollar
• That would mean it would cost $117.79 to buy something worth 100 euros — $1.92 more than at the standard exchange rate
• If your credit card charges a typical foreign transaction fee of 3%, that would tack another $3.53 to the cost
• In total, you’d be paying an extra $5.45 for this purchase

When you multiply that over the dozens of credit card transactions you might have on a trip abroad, you can see the importance of avoiding both DCC and foreign transaction fees.

What to do when you’re asked “USD or local currency?”

The good news is that you have the choice of not using DCC when you use your credit card in a foreign country. Here are some tips for exercising that choice:

At restaurants and retail stores

At places like restaurants and retail stores, you should be given a choice when using your credit card in a foreign country. However, they may not use the exact phrase “dynamic currency conversion.” They might simply ask if you want to pay in U.S.dollars or the local currency.

Another way you can tell if DCC is being applied is that the receipt or payment terminal should show a conversion rate and any fee added for DCC. If you see that, insist that you want the transaction to be in the local currency instead.

At hotels

It’s especially important to avoid DCC when paying for hotels, because accommodations can be one of the largest travel expenses.

With hotels, you may be providing credit card information in advance when making your reservation. When you do that, be alert for any language giving you the choice of using DCC. If given the option, decline it.

When you get your bill at the hotel, you should also see a conversion rate displayed if the transaction is using DCC. In that case, before you check out, tell the hotel receptionist that you want to pay the bill in the local currency instead.

At foreign ATMs

Foreign ATMs should also give you the option to accept DCC. As with other transactions, it may be cheaper to decline this option. Either way, you’ll get foreign currency from the ATM. However, if you decline DCC, the exchange rate will be applied by your credit card company instead of by the ATM provider.

Note that ATM fees in tourist locations are often exorbitantly high. It’s best to minimize ATM use when travelling.

Does this matter if your card has no foreign transaction fees?

If you plan to go abroad often, you may have chosen a travel credit card with no foreign transaction fees. That may be a wise choice, but it doesn’t get you off the hook for DCC costs.

DCC costs are applied separately and on top of any foreign transaction fees charged by your credit card company. DCC costs are charged by the merchant and/or their payments system provider, so they could be assessed even if you’re using a credit card with no foreign transaction fees.

Signs you’re being offered dynamic currency conversion

The phrase “dynamic currency conversion” is formal jargon. Waiters in restaurants or clerks in stores may not be familiar with this phrase, but even if they don’t explicitly offer you DCC, be on the lookout for signs it is being applied:

• The cost is displayed in U.S.dollars
• A clerk or waiter asks if you want to pay in dollars
• An ATM offers you a “guaranteed exchange rate”

If this happens, the transaction could include an extra cost for the conversion into dollars. You might be better off taking the option of paying in the local currency.

The bottom line on foreign currency transactions

When you travel to a foreign country, DCC can seem like a convenient way of having purchases translated into dollars so you have a clear idea of what you’re spending. However, there are other ways of doing that that won’t cost you extra.

Look up the exchange rate between the local currency and the dollar when you start your trip so that you can have a rough idea of the ratio between that currency and dollars. There are also currency conversion apps that will translate for you.

That way, you don’t have to rely on DCC to make the conversion. Here’s why that’s a good idea:

• Paying in the local currency is usually cheaper
• With credit card transactions, you have the option of paying in the local currency
• Your credit card provider will usually give you a better exchange rate if they apply the conversion when they add the transaction to your balance

In short, avoid DCC whenever possible. Doing so should leave you more money for further travels.

Frequently asked questions