Do not pay in your own currency when you are abroad

Do not pay in your own currency. That’s it. It’s the take-out here. If there’s nothing else you remember reading this little column, do this: don’t pay, when traveling abroad, in your own currency. In Australian dollars.

What we are actually talking about here is something called dynamic currency conversion. Sounds sexy, and the ability to “pay in your own currency” when you’re abroad and a bit confused about exchange rates also sounds very appealing. He seems inherently trustworthy. Something that makes sense.

You’ll likely see this option the next time you’re in a foreign country and use a credit or debit card at point of sale. This could be while paying at a restaurant, settling the bill at your hotel, buying something from a shop, or a myriad of other situations where an eftpos machine would be waved at you.

You’ll swipe or tap your card, then you’ll see an option: pay in local currency – for example, Euros – or pay in your own currency. The machine will give you the cost in Euros and Australian dollars. You just select the one you prefer.

And of course Australian dollars seem safer. It’s only later, when you look at the current exchange rate and do the math yourself, that you realize what’s going on.

The exchange rates offered during a dynamic currency conversion are uniformly horrible. Much worse than the official rate (even banks probably won’t give you that exact rate, but it will be better).

These dynamic conversions also take into account several fees, including a discount for the vendor that waves the eftpos machine in your direction and for the company that facilitates the transaction.

In other words, it’s a scam.

It’s also very easy to find yourself clicking “pay in your own currency” if you’re unfamiliar with the system. Now, however, you are.

But there is more. In recent years, these dynamic transactions have moved from the eftpos machine to the ATM, bringing with them their high fees and charges. Most travelers are now familiar with the idea that ATMs charge for transactions, but that’s something else entirely.

Again, it starts out pretty simple. You put your card in the machine, select the local currency amount you want to withdraw, and wait. But then the ATM will ask you a question, telling you how much you are about to withdraw in Australian dollars (which is unusual) and asking if you are happy to accept this conversion.

That’s the trick. It’s an awful conversion. The rate is bad and includes commissions and fees.

You may think it’s the only option and reluctantly press “confirm”, but you don’t have to. If you press “cancel”, you will still receive your money, but at a much more reasonable rate decided by your bank, and without the big commission on top of that.

Get the right debit or credit card – for example, with ING or 28Degrees – and you won’t even have to pay a fee to use a foreign ATM. And that’s another healthy economy.

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