Local or Home Currency? What to Choose When Paying Abroad

You're abroad, about to pay for dinner or withdraw cash from an ATM. The screen or terminal asks: "Would you like to pay in Euros or US Dollars?" It seems like a simple question — but the wrong answer can cost you 3-8% of your entire transaction.

What Happens Behind the Scenes

When You Pay in Local Currency

Your transaction flows like this:

1. You pay €100 in a Paris restaurant
2. The charge goes to Visa/Mastercard as €100
3. Visa converts €100 to ~$108 using their wholesale rate
4. Your bank charges your card $108 (plus any foreign transaction fee, if your card has one)

Visa and Mastercard's exchange rates are very close to the mid-market rate — typically within 0.5%. This is the best conversion you'll get as a consumer.

When You Pay in Home Currency (DCC)

Your transaction flows like this:

1. You pay what's shown as €100 at a Paris restaurant
2. The merchant's bank converts it to $116 at their rate
3. The charge goes to your bank as $116
4. No conversion needed — but you've already been converted at a terrible rate

The merchant's bank uses a rate 3-8% worse than mid-market. On a €100 transaction, you pay $116 instead of $108. That $8 is pure profit for the merchant and their bank.

Why Merchants Push DCC

If DCC is such a bad deal for customers, why do merchants offer it? Because they profit from it:

• Revenue share: Merchants receive 1-2% of the DCC transaction value as a kickback
• Customer perception: Some travelers genuinely think seeing their home currency is helpful
• Confusion: Many people don't understand they have a choice or what it means

The prompts are often designed to push you toward DCC:

• "Pay in USD — Guaranteed rate!" (guarantee of a bad rate)
• "See your transaction in home currency for convenience" (convenient for them)
• "This transaction will be converted" followed by an option buried at the bottom

Common DCC Scenarios

ATM Withdrawals

Many ATMs, especially in tourist areas, aggressively push DCC. The screen might show:

• "Continue with conversion" (DCC, bad)
• "Continue without conversion" (local currency, good)

Sometimes the options are deliberately confusing. Always look for the option that shows the amount in local currency and says you'll be charged by your bank.

Hotels

Hotels often ask at checkout whether you want to pay in local currency or your home currency. Staff may be trained to default to DCC. Clearly state "local currency please" before they process the payment.

Car Rentals

Car rental companies are notorious for sneaking DCC onto transactions. Check the final receipt carefully — it should show the local currency amount, not a converted amount.

Restaurants

Portable card terminals may be set to ask about currency choice. Watch the screen when your card is being processed. If you see your home currency appear, ask them to redo it in local currency.

How to Protect Yourself

1. Be proactive: Before handing over your card, say "Please charge in local currency only"
2. Watch the terminal: See what currency is displayed before entering your PIN or approving
3. Check receipts: If the amount is in your home currency, you've been DCC'd
4. Decline and redo: Ask to void and reprocess in local currency if DCC was applied
5. Use bank ATMs: ATMs inside actual bank branches are less likely to push DCC
6. Consider multi-currency cards: Cards like Wise let you hold local currency, avoiding conversion altogether

Is DCC Ever Worth It?

In theory, DCC offers "certainty" — you know exactly what you'll be charged in your home currency. In practice, this certainty comes at such a high cost (3-8%) that it's never worth it.

If you want certainty:

• Use a multi-currency card and convert before you spend
• Check the current exchange rate on your phone to estimate costs
• Use a budgeting app that shows foreign transactions in your currency

These give you visibility without the 5%+ premium.

DCC on Online Purchases

DCC can also appear when buying online from foreign merchants. If a website offers to show prices in your currency, that's usually fine — it's just display. But at checkout, if you're asked to "pay in USD" instead of the merchant's local currency, the same DCC dynamics apply.

For online purchases, always select the merchant's local currency at checkout. Let your card handle the conversion.

Frequently Asked Questions

Why is paying in local currency cheaper?

When you pay in local currency, your card company (Visa/Mastercard) converts at competitive wholesale rates. When you choose home currency, the merchant's bank does the conversion at rates 3-8% worse. The merchant often gets a kickback too, which is why they push the option.

What is Dynamic Currency Conversion (DCC)?

DCC is when a merchant or ATM offers to convert your transaction to your home currency at the point of sale. It sounds convenient ("see the cost in dollars!") but uses terrible exchange rates. The merchant and their bank profit from this conversion. It's legal but almost always a bad deal for consumers.

Do all merchants offer DCC?

No. DCC is mainly available through certain payment processors, typically at tourist-heavy locations, hotels, rental cars, and restaurants. Smaller local shops often don't have DCC capability. ATMs operated by commercial banks frequently offer DCC; ATMs inside actual bank branches usually don't.

What if the merchant already converted without asking?

Ask them to void the transaction and run it again in local currency. If they refuse, it's worth disputing with your card company for DCC applied without consent. Some card issuers have policies against involuntary DCC. Going forward, clearly state "local currency only" before they process.

The Bottom Line

The answer is always local currency. The only exceptions would be if you somehow got a better deal through DCC — which doesn't happen. The system is designed to extract money from travelers who don't know better.

Now you know better. Pass it on.