Nationwide Building Society, a leading financial services provider in the UK, recently took the time to offer the following detailed comments about Dynamic Currency Conversion (DCC). There has been increasing news coverage on DCC in recent months as financial institutions, travel advisers and DCC service providers debate the value of DCC to consumers. While some travel advisors have resorted to asserting that DCC is more scam than service, DCC service providers suggest that DCC offers consumers transparency about conversion fees at the point of sale. These providers aptly point out that it is often credit card issuers who charge fees after DCC has been preformed that ends up costing consumers extra money. By itself the actual fee incurred by just the DCC transaction is on par with the fees charged by issuing banks for currency conversion.

Nationwide stands out in the UK as the only high street financial organization that does not charge fees for using their cards abroad (see below). Their perspective on DCC is valuable not only to residents of the UK, but is relevant to travelers of any origin who encounter DCC. Much of Nationwide’s advice about how to handle DCC can be applied no matter who issues the credit card or debit card being used. Below are some of Nationwide’s comments about DCC and recommendations on how to handle this service.

So what is DCC?
Dynamic Currency Conversion is, in theory, an optional ‘service’ provided by individual retailers or at ATMs. It should be performed with the cardholder’s consent. It allows the UK cardholder the option to pay in either the currency of the country they are visiting or pounds sterling. If the card holder opts to pay in sterling the payment will be converted from the local currency to sterling by the retailer or bank who will apply their own conversion fee. If a customer chooses local currency, such as Euros, the card provider will handle the conversion. Nearly all card providers charge a currency conversion fee or a foreign usage fee.

However, Nationwide is the only high street financial organisation and the only debit card provider that’s doesn’t charge any fees for card use abroad. Therefore, to safeguard this benefit, Nationwide’s customers should always opt for the local currency of the country they are visiting.

Unlike Nationwide’s customers, cardholders who bank elsewhere face a more complicated scenario. For certain transactions it may be less expensive for them to pay in sterling. They would have to know what their bank charges for foreign usage and currency conversion. In addition, they would have to find out the VISA rate for that day and compare this to the sterling rate being offered by the retailer.

For regulatory and anti-competitive reasons VISA* is unable to prevent the operation of DCC by retailers or ATM providers but has introduced rules to govern it. Prior to the transaction, a shop or restaurant offering the service should verbally inform the cardholder of the payment choice available, but language barriers will often prevent this. This should be followed by a statement on the signature slip illustrating the choice the cardholder has made.

What is Nationwide’s Position on DCC?
Nationwide is concerned that there is a general lack of awareness about Dynamic Currency Conversion. Nationwide customers need to know how to protect their free card use abroad and card holders from other organisations need to ensure they are getting the best deal from their card transactions. In the past, some retailers have not complied with the rules set out by Visa, applying the conversion service automatically without the cardholders consent. Visa guidelines state that UK cardholders should be verbally informed of the payment choices available and Visa have undertaken work to ensure that this does happen.

We would like to see clarity and transparency around this currency conversion service so customers understand what they are being offered and the implications of opting for a DCC transaction. Nationwide cardholders should always choose to pay in the local currency of the country they are visiting to ensure that they get the best exchange rate and no commission charges.

What Should Consumers Know About DCC at ATMs?
DCC is an optional service that has been offered to cardholders at the point of sale by a growing number of European retailers since 1998. It gives cardholders the choice to pay for goods in their home currency or the local market currency.

DCC at ATMs was introduced as a pilot in Europe in 2005. The pilot was proven successful and customer feedback (collected by Visa) showed that rules to ensure transparency and cardholder choice were being consistently observed.

The provision of DCC at ATMs is optional and at the discretion of the banks concerned. However, in order to offer DCC at ATMs for Visa cardholders, banks must comply with the same stringent Visa rules that apply to retailers when they provide DCC at the point of sale. They must be transparent about the charges associated with a DCC transaction - - exchange rate and any commission charged - - and the cardholder must be given the option to actively choose the DCC service based on this information. This means they will have a choice of opting for the transaction in their home currency or continuing with the transaction in the local market currency.

Does Nationwide have any Tips for Nationwide Customers Traveling Abroad?

• As Nationwide does not apply any foreign usage or conversion charges for making purchases or withdrawing cash using their debit or credit card abroad, customers should always opt to transact in the local currency of the country they are visiting.
• For Chip & PIN transactions, the payment terminal should indicate the value of the transaction in the local currency, for example Euros. If the transaction is not in the local currency, customers should request to change the transaction to the local currency.
• If the retailer or restaurant claims they cannot switch between currencies, customers should confirm they are entitled to pay in local currency. The retailer should speak to their bank for any clarification on this issue.
• Signature slips or bills where DCC has been applied may have a statement on them to the effect of “I accept that I have been offered a choice of currencies for payment. I accept the conversion rate and final amount. I understand that the choice of transaction currency is final.” If a choice hasn’t been offered and therefore the statement is false then a customer is within their rights not to sign the slip or bill. Altering the slip or bill however, such as crossing out the statement and amount in sterling, will not prevent the transaction being processed in sterling.
• Nationwide wants to ensure its customers continue to benefit from free card use abroad. Therefore, if a Nationwide cardholder encounters a retailer or restaurant not operating by the VISA guidelines they should contact the Society on 08457 30 20 10 with the details of the transaction and send the receipt where possible. Nationwide will raise the matter directly with VISA. VISA will take action if necessary to make sure the service is operating correctly.

* Nationwide can only state the VISA positioning as we do not issue Mastercard branded Debit or Credit Cards