Bits: my worst ever Dynamic Currency Conversion scam, Flybe sale, good Iberia Plus wine offer

Lots of small stories today as I try to clear a backlog after my trip last week.  And speaking of that trip ….

The worst example of Dynamic Currency Conversion I have ever seen

I was in the Waldorf-Astoria Ras al-Khaimah last week which I will review soon.  It is a very impressive hotel but, at check-out, I experienced the worst Dynamic Currency Conversion scam ever.

Hotels like to give you option to pay ‘in your home currency’ because they use an exchange rate far worse than the one your credit card company uses.  The total cost will be higher than if you paid in local currency and then paid the 3% FX fee on your card.  If you have a Post Office, Lloyds Avios or Halifax Clarity card, there will be no FX fee.

You MUST be offered the choice of paying in local currency.  A hotel is violating its credit card agreement otherwise.  Some hotels will ‘try it on’, however, and give you a card machine which displays a Sterling figure.  You need to reject this and insist you are charged in local currency.

What the Waldorf-Astoria did was worse.  I was given the card machine and the amount showing was in Dirham.  I entered my PIN.  The screen then flashed up ‘£ XXX.XX charged’ as it processed the transaction – in Sterling.

This was clear theft.  What was even more shocking is that the payment slip that came out of the machine showed the total in Dirham and only in small print did it say that I had actually paid in Pounds.

I immediately told the hotel to reverse the transaction.  It turned out that this particular card machine had been especially programmed to do this and could not work in any other way, so a different card reader had to be found.

Using the 2nd machine, I was given the option of paying in Pounds or Dirham.  I chose Dirham and charged it to my Curve MasterCard which has a 1% FX fee.

Because you see instantly the value of Curve transactions on your smartphone, I could see within seconds that I had saved £30.36 compared to the first transaction.  This was 4% of the total bill meaning that the hotel had charged me 5% for the ‘privilege’ of ‘paying in my home currency’.

You should ALWAYS reject the option to pay in £ when overseas, even if your credit card has a 3% FX fee – you will still be better off.

waldorf astoria ras al khaimah

Flybe Super Size Spring Sale launched

Flybe has launched another short term sale – the key difference with this one is that it covers May half-term and all of the Summer.

Flights are priced from £24.99 and must be booked by 8th March.  Travel dates are from 12th April to 19th October.

Remember that you collect 4 Avios for every £1 spent on Flybe flights, excluding taxes.  Full details can be found here.

Flybe sale

Earn 480 Avios in Iberia Plus with a new wine offer

Finally, Iberia Plus has launched a new offer with its UK wine partner Vinoseleccion.

As you can see here, £48 gets you six bottles of 2011 Rioja.  This includes free UK delivery.  You will also receive 480 Avios into your Iberia Plus account, which is one way of activing it in order to use ‘Combine My Avios’.

A few HFP readers have used Vinoseleccion in the past and the general feedback about the wine has been positive.

(Want to earn more Avios?  Click here to visit our home page for the latest articles on earning and spending your Avios points and click here to see how to earn more Avios from current offers and promotions.)

Bits: 500 Avios with first LOVEtheatre booking, new Qatar business class seat on the way
25% off Starwood Preferred Guest points means buying airline miles at 1.5p
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Comments

  1. DCC is also one of my pet hates. I suggest a one star negative review on TripAdvisor calling them out for overcharging (which is effectively what it amounts to, worse still it is deliberately hidden overcharging). If they refuse to refund, after making a fuss at the time I also dispute the transaction and request the difference to be refunded by the card company. Even if it is a few pence it’s the principle.

    The worst bit is retailers are being encouraged to ‘offer’ DCC as an additional revenue stream. No wonder some them ‘forget’ to give you the choice or claim to have machines that can’t.

    • Callum says:

      In my experience, ignorance about DCC is as prevalent amongst cashiers as it is amongst the general public. While I’m sure some of them are deliberately scamming you, I’d wager most don’t think they are. Many I speak to (in less touristy areas than upmarket hotels) are genuinely confused when I say I’d rather be charged in the local currency and had no idea that DCC charges you more.

      I also met a few small business owners (who I knew a little beforehand so was confident they weren’t lying) in Australia who were specifically told by the Travelex reps who sold them the machines that it’s better for the customer to use DCC.

      • Sussex bantam says:

        I used to be the finance director of a set of retail stores which operated in airports. Barclaycard actively sold DCC as a way for us to make more profit by overcharging our customers. They literally pointed out how to set artificially low exchange rates and presented us with a business case showing increased profits

  2. Mark LLL says:

    On an unplanned visit to Ireland, I presented at a Dublin Tourism Office and arranged a seven night stay at a city centre hotel. The office required ten percent of the price upfront (which the hotel would deduct from my bill) all prices in euro. I argued they should ask for ten pc of first night only, but no matter because whatever I paid would be deducted later, so no loss.
    On check-in I surrendered the Tourism Office receipt for the amount I’d paid.
    At check-out, – very rushed, my biggest mistake – the hotel billed me in Sterling. I paid it using cc. Felt aggrieved about their dodgy exchange rate, but no time to argue.
    Later realised that hotel had not deducted the ten pc which I’d paid upfront.

  3. Leo_C says:

    Thanks Rob for this- it not only alerts new people to the issue but also illustrates how much you can save by following the advice

    Leo

  4. Yeah, it happens a lot everywhere, last one I had was in duty free in Rome. The worst is that many machines don’t display the value when you enter PIN, so you can’t see that currency is wrong until confirmation is printed. If there is one useful regulation EU should enforce is for every chip&pin machine to have to display charge you’re accepting – otherwise frankly I’d much rather have goold-old signature, at least I know what I’m signing!
    In Rome I had to get the charge reversed and then charged in Euros – the lady said that it just went straight through to pounds but I wonder if it’s really the case, or did she select the home currency without thinking much or asking me. She could then use euro on the same machine after I complained I wanted to be charged in euros.

  5. Talay says:

    I do not own hotels but I use Elavon as a merchant acquirer for card transactions.

    They offer DCC with a 3% or 5% uplift but you don’t get it all, as they rob you as well as the customer. I don’t use it as I think it is simply theft but some do.

    I have local currency banks in many places I visit so can pay in local currency.

    • Elavon only charge 3.5% uplift for doing the conversion and not 5% and you are correct a % of that stays with the hotel.
      I am not quite sure how you can say you are being robbed for offering DCC to your guest, you dont have to have it activated on your terminals.

      • There is no robbery taking place. Elavon is not a charity and takes a % of the mark up for providing the service. Bigger companies negotiate the %. Smaller companies just work with set options. As a merchant it is a good income source for little work.

  6. The think what seems to have been totally missed here is that a lot of banks outside of the UK will charge more than 3.5% in fees for foreign transactions. Sure you have a 1% card and that’s great for you but your write up makes it sound like 1% cards are standard practice. This is not the case.

    You totally forgot to mention the benefits of DCC when calling it a scam and that might suggest that you have not really thought about what DCC really is.

    For a bit of balance on this…
    The customer gets to pay the final amount in a currency that they understand
    The customer gets the exchange rate fixed for the transaction so they don’t need to worry about ex rate changes before the transaction is posted.
    The customer is often covered by a rate guarantee, meaning that if it turns out the issue/bank offered a better rate on the same day then they can claim the difference back.

    Whilst these benefits may not be important to you, they can be very important to other people and are anything but a scam for them.

    DCC may not appeal very much to people in the UK but can be very attractive to people coming into the UK, especially if the the bank/issues they use charge conversion fees in excess of 3.5%.

    DCC is a choice and is different for everyone, I am not sure how you can call that a scam?

    • TGLoyalty says:

      Surely the scam Rob is talking about is not being given the choice in the first place.

      I can’t think of a single reason to choose it unless you are buying in a country with extremely volatile exchange rate (RUB ZAR BRL come to mind atm) even then I’d take the chance and just let my 0 fees card sort it out.

      • And TGLoyalty you are lucky in the fact that you have a 0 fee card, not everyone has this and in some cases banks often charge a lot more than 3.5% to do the conversion.

        Yes you are correct you should always be offered DCC, if you are not offered it and they process it without your permission then you can claim the full amount back from your bank.

        Lets not forget, just because it is not suitable for you is not to say it is the same for everyone.

        The hotel in question was wrong to do what they did but I would hardly brand DCC as a whole a scam and that is what this blog post has attempted to do.

        • Which cards charge a lot more than 3.5%?? Many US cards are fee-free, UK are almost all either fee-free or 2.5-2.99%, no Australian ones I saw were over 3% – I’d be interested to know which cards charge so much more. Given the predominantly UK audience for the blog any UK examples would be of particular interest.

          The way DCC is actively hidden from many customers (and it appears from the comments often retailers too) in the fine print and that the company carrying out the conversion makes a tidy sum on the side certainly makes it a scam in my (and many others’) view.

    • Utter balls. DCC is a scam. How can the customer evaluate the “choice” he is offered.

      • The customer can evaluate with the information they have at hand and from perhaps knowing what the bank/issuer will charge them. If they cant do that then they would have a rate match and this would mean if the bank did offer a better rate on the same day then they could claim the difference back.

        I don’t know of any bank that will offer a rate match the other way round, In my mind this is a win win for the customer by using DCC.

  7. I work in this area so I can add some insight.

    Usually the DCC mark up in Europe is around 3%. In the Middle East from 3 to even 7% can be seen on occasions.

    DCC is not always a bad option, and often the bad reputation is from articles where people are not analysing the full picture. For instance my Barclays Premier and AMEX Platinum cards charge me a 2.75% currency conversion fee, I know some other credit cards charge 3.5% or so when transacting in a foreign currency. If I pay 3% mark up on DCC then the benefit is that at least I know what I am going to be charged in £’s on my statement, whereas if I pay in local currency I do not know the exact amount.

    If the card issuer charges a mark up then the card issuer makes a profit on this mark up. In DCC the merchant and the card acquirer share in this mark up – whereas the issuer does not get anything. If a bank is truly offering an FX Free card then this product will be a loss leader for them. Every company, no matter its size will have a cost of providing a foreign currency transaction – as essentially to that bank they need to exchange foreign currency in order to allow payment in local currency.

    Even a large bank with its scale does not get the exact spot rate on FX, therefore I would suggest that whilst they may not be charging a fee per se, you may not be getting the actual published rate that you may be expecting from looking in the financial pages. Finally, many card providers do not update their internal rates on a realtime basis, so an FX fee covers the volatility of the market movements, without having any spread in place the banks runs the risk of its rates set earlier in the day being loss making at the point when you make your purchases.

    • Just to add to this. Visa and MasterCard operating rules are very clear that cardholder must be offered a clear choice in both currencies, and any DCC by force or without choice is against their rules. I have seen merchants get significant fines for DCC non compliance, which can run into very high amounts just for one or two transgressions.

      • Which is the core issue of course, and why I always dispute the charge and ask to be refunded the difference if the retailer refuses to do so or claims they cannot.

        If enough people do this the rules will be enforced and the retailers will quickly find it isn’t worth breaking them.

    • Mr Dee says:

      Haven’t seen a situation where DCC has been a good option, as many have already said that the 3% fee charged when just using a standard credit card is still lower than a DCC transaction. Yes you get to know the amount in GBP that you would be charged but when its always going to be more than not having the DCC it still makes no sense in choosing it as you would still need to pay your bill either way.

      • It’s a service that you can chose yes or no to use. If the DCC rate is 3% and the card issuer will charge you close to this then there may be value in knowing how much you will be billed. I sometimes choose DCC despite knowing its workings quit closely.

        • Mr Dee says:

          Fair enough some people maybe interested to know the costs upfront before agreeing to them.

          There are plenty of options for cards with no fx fees especially for transactions in Europe, even 3% is too much for me.

          Can’t wait for the curve card!

        • Nonsense. It’s a scam. Stop trying to defend it. How does the customer make an informed choice?

        • The customer makes an informed choice because they know that, for example paying in Euros means uncertainty and accepting the exchange rate on offer means they know exactly how much will show on the bank statement.

          It’s even more informed if they have checked all the bank/issue fees before going on holiday.

  8. Revolut is a great new charge free credit card. A British startup too: https://revolut.com/

    • Using it in any country will automatically use that country’s currency and the exchange rate used is the same as the rate seen on xe.com. What’s especially good is that it ties in with an app on your phone so when you sign up you get a digital card immediately. You can also freeze your card from the app at any time. I’m not affiliated with them in any way – just thought it’s a genuinely useful and interesting service.

      • So how do they make any money?

        • I would assume in the same way as other card issuers I assume, via merchant fees.

        • Exactly:

          “We earn a nominal fee paid to us by merchants every time you spend on your Revolut Card.
          Revolut was launched to offer a fair and transparent service. It has been designed to offer the best value and the best user experience.”

      • No, it will never be the same as xe.com unless it doesn’t use visa, MasterCard or amex.

        • From their FAQ – I don’t know if this is the same rate as visa, MasterCard or amex. I also couldn’t see the footnote though due to the formatting of their site:

          Our rates mirror the Spot Interbank exchange rate*. The interbank market is the top-level foreign exchange market where banks exchange different currencies. It is a wholesale market through which most currency transactions are channeled and, as such, offers the best possible exchange rate available. This spot interbank exchange rate typically beats that of banks and other consumer foreign exchange services by 3-5%.

  9. Lee-Anne says:

    Been wise to DCC for quite a few years thanks to Martin Lewis / Moneysavingexpert. Also have a Halifax Clarity credit card which has no FX fees. We travel to Thailand most years and they always ask – and show you on paper the two rates. However I’ve never had anything pushy or underhand since I have become wise to this.

    However am really annoyed that an agent am currently using in South Africa for a safari this summer is trying to get us to pay using an online portal called Exchange4Free. This portal will only let you pay in your local currency (GBP) and gives no option to pay in ZAR!! I refused when paying the initial balance to use the portal and insisted a different route (essentially manual via the lodges themselves). But they are trying to sell it again as a great way to make all the various deposits or balances in one easy convenient payment. Convenient for how? Not me!!! Am not sure if the agent is trying to play dumb or really doesn’t understand what I am saying when I say that it is disadvantageous to me.

    What also annoys me is that the portal payment page states no expensive international transfer or swift fees which almost implies no fees in that regard at all…………………………………………..however at the bottom of the page after you enter the amount of ZAR to be paid it shows transfer fee £0.00 and below that an unspecified fee of £37.31!!!

    The difference on our balance is around £80 even factoring in 3% fees for credit card payment!

  10. Just out of my ignorance, do any Visa or Mastercard offer perks for foreign currency transactions irrespective of transaction fee? On Amex Gold I get double reward points on non sterling transactions – granted once you factor in 3% loading fee you are effectively paying 3p per Avios, which is not a cheap way to buy Avios – but still better than DCC when one would lose out on the bonus points altogether.

    • I don’t think so – for Visa and MC each issuing bank will set its own rewards rather than VI and MC themselves (Amex controls the rewards and the processing of the cards themselves). Also now the interchange fees have been capped at 0.20% and 0.30% for Visa and MasterCard Debit (0.20%) and Credit (0.30%) for consumer cards, this means there is less income for rewards to be paid from – all rewards are essentially paid from these interchange fees. Amex have not been part of this regulation from the EU, thus at the moment Amex still charges corporate merchants 2-4% interchange fee, which is then used for the perks for cardholders.

  11. Hi Rob, completely OT but was just browsing through BA’s The Club and saw the Harvey Nichols offer of 5 Avios per £1 spent and 2,000 bonus if you spent more than £1,000 plus the BA > HN status matching that I thought might be interesting for the audience here. Just not sure if it was on your radar so wanted to mention it.

  12. Worth noting that DCC is also prevalent in a lot of duty free shops around the world, equally annoying.

    • Worst offender might be “Lotte Duty Free” in South Korea, which DCCs you in USD.

  13. Iberia Plus Store is giving 200 free Avios (was 165 previously, mentioned in December) for the Amazon BuyVip signup!