Article: Why is Dynamic Currency Conversion Even Legal?

[Seat0B]

Some people might like to know straight away how much a service cost in their own currency when purchasing overseas in a foreign currency, and not wait to look at their on-line statement later, in fact a few days later.

My Macquarie Bank debit card app pings the full amount charged in AUD (and local currency too) all but instantaneously if you select local currency when paying. No waiting at all to find out what you paid.

 

[Beano]

Nope.

DCC is basically a rort. Hence the premise of

My Macquarie Bank debit card app pings the full amount charged in AUD (and local currency too) all but instantaneously if you select local currency when paying. No waiting at all to find out what you paid.

It took 4 days for purchases in Sydney last Friday to appear on my NZ statement.

 

[Beano]

That’s not really related to DCC but normal payment processing. Anyone here can get an international fee free debit card and pay in local currency that gets converted to the spot rate with a very small (< 0.5%) VISA or MC fee built in.

In some countries - here, NZ, some merchants pass on the CC/DC fee.

It definitely what DCC is as explained in the article and any on-line web site. Google DCC! There is no rort. It is standard business practice for everyone who is involved in any purchasing process to add their mark-up. If you are in business you would understand that. Your choice is which path to take and to accept the consequences.
If there is any rort it is in the lack of knowledge of the purchaser and in sellers pre-empting your choice as illustrated in other posts.
The process itself is not a rort and perfectly legal. You can accept or decline any service and take an alternative.
In any case do most people care? How many keep their receipts from their personal purchasing and reconcile their home accounts regularly. (We do)

In business again, who cares. The business or your client is paying. Does your business have a policy on this; mine doesn't. If you are self employed you should be well aware of this and take appropriate action.

 

[SYD]

My Macquarie Bank debit card app pings the full amount charged in AUD (and local currency too) all but instantaneously if you select local currency when paying. No waiting at all to find out what you paid.

Yep. When I tap my phone (mostly 28° MC but occasionally ING VISA Debit), there’s a pop up with the amount charged (eg local currency amount) and the AUD equivalent is there in app immediately (ie the small built in fee charged by MC and VISA).

For convenience, I compare with the XE spot rate and it’s usually within a few cents.

 

[Beano]

Yep. When I tap my phone (mostly 28° MC but occasionally ING VISA Debit), there’s a pop up with the amount charged (eg local currency amount) and the AUD equivalent is there in app immediately.

For convenience, I compare with the XE spot rate and it’s usually within a few cents.

My personal one comes up quickly but it has 'pending" attached to it. Work card takes a few days.

 

[SYD]

My personal one comes up quickly but it has 'pending" attached to it. Work card takes a few days.

Those pending charges settle for the same amount. A key exception is the old style USA restaurant chits (still widely used….) that you write in the tip amount. The authorisation is the pre-tip amount and the final settled amount includes the tip…

It pays to retain those chits. I’ve seen places increase the tip amount unilaterally but have disputed the charge and had reversed.

Hotels and car rentals may settled a preauthorisation to a different amount if there were variable charges such as mini bars, petrol etc.

DCC would probably make it harder to understand what happened in those scenarios - as well as pay more.

 

[Beano]

Those pending charges settle for the same amount. A key exception is the old style USA restaurant chits (still widely used….) that you write in the tip amount. The authorisation is the pre-tip amount and the final settled amount includes the tip…

It pays to retain those chits. I’ve seen places increase the tip amount unilaterally but have disputed the charge and had reversed.

Hotels and car rentals may settled a preauthorisation to a different amount if there were variable charges such as mini bars, petrol etc.

DCC would probably make it harder to understand what happened in those scenarios - as well as pay more.

I have an AUD-1 (converted to NZD -1.13, 10% currency conversion and 3% fee) siting for over a week in my statement. I wonder how long it will take to go away?

 

[anat0l]

I would hazard a guess that the people who agree to DCC are likely also the ones who use a 3% international fee card, not knowing how/unwilling to open an account without those fees and are getting done twice every transaction.

Hey! I resent that. I do use my credit card for some international purchases, and yes I know there's a 3% fee on the transaction. Why do I do it?

• I still get points for the purchase. Sure, it's more expensive than usual, but so there.
• Changing for cash at most forex places in Australia incurs a minimum 4% margin against the midmarket, with or without commission. Most good banks use an interchange rate which is very close to midmarket, so adding their 3% fee is likely to be slightly better, even or rarely worse than having changed for the currency in Australia and paying in cash.

In all cases, I don't use DCC. I'm not that stupid or lazy.


Why is it legal?

The main tenet of capitalism is that anyone is allowed to offer something (goods or services) for sale for any amount that people are willing to consent to pay. If you could sell bottles of Mount Franklin for $2000 apiece, so long as people are willing to pay that, that's capitalism and totally legitimate. (You might even end up on a magazine cover or MBA textbook. Pharma bro, anyone?)

However, what is legal versus what is moral can be totally different. The law only protects the former; it has little foundation in the latter.

Australia is probably one of the few countries in the world where people - from commoners to politicians/decision makers alike - actually believe that if something is financially unfair or unreasonable, yet is legal, it should be considered to be illegal. I mean, how common is it in the world that it is legally mandatory to display all inclusive pricing inclusive of all taxes, or where a groundswell of public can force the government to tell the banks that any fees they charge - even late fees - must be strictly for the cost of doing business and not for pure profit?

In most other countries in the world, it's basically a tax on the idiotic or ignorant; in some cases, the companies which benefit from the immoral practice use their influence and/or pay off politicians in order to stop any attempts to outlaw said immoral practices.

The article all makes sense but honestly it doesn't really address the titular question except to a surface level, so it's not entirely satisfying.

Also see: why is Euronet legal?

 

[SydneySwan]

Also see: why is Euronet legal?

I call them Scamnet

 

[CaptJCool]

By 2016 DCC was a thing
I used it a few times on a Euro trip and there was no 3% International foreign exchange fee

But the CC companies CHANGED their T&Cs to require the MERCHANT to be Australian

Got caught twice on the trip in June-Sept one in Germany with A hire car company was done by my mate while I was in the bathroom and another in Poland tap and go where the staff member had selected it without my knowledge. Small amount
Both whacked a 3% fee

It was offered more than occasionally so had to be alert to it

However Qantas Hotels does transactions in $A AND IS AN AUSTRALIAN MERCHANT so there’s no 3% fee on those overseas hotel bookings

 

[Himeno]

The 7-11 ATMs in Japan have started added the DCC option (they didn't the last time I used them a year ago). 4% fee. Better rate then I've seen elsewhere, but still selecting JPY.

 

[albatross710]

You still didn't answer the question, but back to the premise, should it be illegal? It is tantamount to theft. You are purchasing a product at a particular price and they try to charge you a different price by deception. It is presented to you in AUD in some cases, but it is still not reasonable.

Is this just an automation of the old exchange rate shopping around? Remember when travellers checks were a thing and Hotel reception provided currency exchange. I never used a hotel exchange rate but we all know they were ridiculous rates. This new dynamic method is people accepting the currency exchange rate of their shop.

A double whammy is on my travel card. If I have converted my funds to say JPY and happily travelling and paying in JPY. A store or online merchant decides to process my transaction in AUD Wise will process it as AUD and convert JPY back to AUD to cover it. Those funds have been converted twice. Ouch. Double Ouch.

I'm feeling old now, I see I write an earlier post about this in 2017 Vendors offering "select your own payment currency"

 

[Beano]

The original question showed a degree of naivety when it comes to financial systems. DCC is perfectly legal and shouldn't be made illegal, as it is normal trading practice. It offers a "choice to consumers" which is a slogan of the capitalist system. You may as well say that a store putting a mark-up on its goods is a rort, or the interest rates on savings and borrowing is a rort because they are not the PCR. ( many stores have a 100% mark-up). I suppose you could say it is in the eye of the beholder whether something is a rort.

For glass half full people, life is a rort.

 

[Rich]

Is this just an automation of the old exchange rate shopping around? Remember when travellers checks were a thing and Hotel reception provided currency exchange. I never used a hotel exchange rate but we all know they were ridiculous rates. This new dynamic method is people accepting the currency exchange rate of their shop.

A double whammy is on my travel card. If I have converted my funds to say JPY and happily travelling and paying in JPY. A store or online merchant decides to process my transaction in AUD Wise will process it as AUD and convert JPY back to AUD to cover it. Those funds have been converted twice. Ouch. Double Ouch.

I'm feeling old now, I see I write an earlier post about this in 2017 Vendors offering "select your own payment currency"

The difference is the hotel would display the exchange rate. It was there for all to see and the principal transaction was to exchange currency. But with DCC it is not as obvious. In some cases many have mentioned here, they have gone to pay in one currency and been presented with another after the cashier has pre-selected this for them. That is still dodgy to me, legal or not.
Further, the word dynamic implies some sort of current pricing. If they said it is current and we add x% that least that would be transparent and the customer could make an informed choice. Instead it is almost always done in an underhanded way.

 

[Beano]

The difference is the hotel would display the exchange rate. It was there for all to see and the principal transaction was to exchange currency. But with DCC it is not as obvious. In some cases many have mentioned here, they have gone to pay in one currency and been presented with another after the cashier has pre-selected this for them. That is still dodgy to me, legal or not.
Further, the word dynamic implies some sort of current pricing. If they said it is current and we add x% that least that would be transparent and the customer could make an informed choice. Instead it is almost always done in an underhanded way.

I would agree with that. The rort is not in the practice itself but in the way it is presented at POS.