What is dynamic currency conversion?

When a foreign card machine or website offers to charge you in your home currency instead of the local one. It sounds helpful and it is a revenue product — you should almost always decline it.

How it works. Normally you are charged in local currency, and your own card network converts at its wholesale rate, to which your bank may add a foreign transaction fee. With dynamic currency conversion, the merchant's payment provider does the conversion instead, at a rate it chooses, typically with a markup of around 3% to 7% — sometimes more — embedded in the exchange rate rather than shown as a fee.

Why it is persuasive. The terminal displays a familiar currency and a definite amount, removing uncertainty. It frames the choice as "know exactly what you'll pay" while the cost is hidden inside the rate. The markup is shared between the provider and the merchant, which is why staff sometimes encourage it.

Where you will meet it: card terminals abroad, cash machines, hotel checkouts, car hire, airline websites selling in your currency, and some online merchants.

What to do:

Always choose the local currency — euros in France, yen in Japan. Your card issuer's conversion is nearly always better.

Watch cash machines, which present it as an "exchange rate guarantee" with the accept option prominent. Decline conversion is the correct choice, even when the wording implies otherwise.

Check the receipt. If it was applied without asking, ask for it to be reversed and redone — merchants are generally required to offer a genuine choice.

Use a card with no foreign transaction fee, which removes the other cost layer.

Do not use a credit card for cash withdrawals abroad, where interest and cash advance fees start immediately and dwarf everything discussed here.

Worth knowing: regulations in some regions require clearer disclosure of the markup against a reference rate, which has improved transparency without removing the product.