Currency Conversion Overcharge
What it looks like: "A currency conversion fee of up to 3% applies. Our exchange rate will be used."
The Trap
- "Our exchange rate" is the key phrase. The company's rate is always worse than the Visa/Mastercard rate. Typically spot + 3-5%, compared to Visa/MC spot + ~0.5%.
- "Up to 3%" sounds reasonable, but combined with a bad exchange rate, the effective cost is 4-6%.
- Double-dip: The company charges a conversion fee (2%) AND uses a bad rate (2% hidden markup). Your bank may also add a foreign transaction fee (1-3%). Total: 5-7%.
- Dynamic Currency Conversion (DCC): Offered at checkout — "Pay $10 USD instead of €9 EUR." Always uses a terrible rate. Always decline.
Real Cost Comparison
| Scenario | Fee | Hidden Markup | Total Cost |
|---|---|---|---|
| Visa/MC direct | 0% | 0.5% | 0.5% |
| Company rate | 2% | 2% | 4% |
| Company + bank FT fee | 2% + 3% | 2% | 7% |
| DCC at checkout | 0% stated | 4-5% | 4-5% |
What to Search For
currency conversion + fee, exchange rate + our/company, conversion + charge
Your Action Plan
- If you see "our exchange rate" → expect 3-5% above market.
- Always pay in the local currency of the merchant, NOT your home currency. Decline DCC.
- Use a credit card with no foreign transaction fee (many premium cards offer this).
- For recurring international subscriptions: check the effective rate monthly. If it varies wildly, the company is adjusting the rate opportunistically.
- Calculate real cost: stated conversion fee + hidden rate markup. "2% conversion fee" with a company rate = likely 4-5% total.