Dynamic Currency Conversion — Definition Explained Simply | Examples & Role

Dynamic Currency Conversion (DCC) is a technology that enables customers, when making a purchase abroad, to select the payment currency: either the local currency of the country or the currency in which their bank card was issued (for example, euros or US dollars). The service is offered by banks, merchants, or payment terminals.

The DCC system automatically converts the purchase amount at an exchange rate set by the acquiring bank or the payment processor. The terminal screen shows the final amount in both currencies, and the customer confirms the choice. While convenient, the DCC rate often includes an additional markup or commission, making it less favorable than paying in the local currency.

How DCC Works

• The purchase is made abroad in the local currency.
• The terminal offers a choice between payment in the local currency or the card’s currency.
• If the card’s currency is selected, the amount is converted automatically at the DCC rate.
• The issuing bank then charges the transaction in the card’s currency without further conversion.

Advantages and Disadvantages

• Advantages: transparency (the amount is known immediately), convenience for travelers.
• Disadvantages: the DCC exchange rate is often less favorable; hidden fees may apply.