Ask Annie

If you use a card abroad, look out for 'dynamic' retailers
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The Independent Online

I am absolutely furious about the way in which my credit card has been charged after a recent holiday in Spain.

I deliberately took out a Nationwide card because it does not impose the iniquitous exchange-rate loading fee levied by other credit cards, which I know can add as much as 2.75 per cent to the cost of every transaction in a foreign currency.

However, I have now found that on two of my transactions, I have actually been charged in sterling, rather than euros at the point of sale – with the conversion to sterling being done by the card company.

This was at an appalling exchange rate, and was even worse than the sum I would have been charged had I paid in euros with a different credit card that levied the exchange-rate loading as well.

Can you tell me what is going on?

JV, Southampton

You have been hit by a phenomenon known as "dynamic currency conversion" (DCC).

This is a facility that allows retailers and service providers to charge you in your home currency rather than the local one, and apply their own conversion fee.

The deal is sold to consumers as being a "handy way to budget", as you know exactly what you are being charged at the point of sale in your home currency, and are not subject to unexpected exchange-rate fluctuations in the time between the purchase and the debit from your account.

With cards such as Nationwide's, which don't levy exchange-rate loading, it is always cheaper to pay in the local currency. But with other cards it could actually be cheaper for you to pay with DCC – in theory at least – because the retailer or retailer's bank sets the conversion rate, and potentially that could be lower than Visa's.

That said, the promotional material issued to retailers by some banks hints at a different story, with claims that shops and restaurants can "earn revenue for accepting international customers' payments" or "earn extra income with exchange rate commission".

In other words, adverts such as these suggest that the retailer is able to skim a bit of the profit off the deal.

Visa and MasterCard's terms and conditions for DCC say that the customer must be allowed to choose the currency in which to pay at the point of sale – either the local one or the home currency.

But in practice, this does not always happen, and consumers are urged to be aware of unscrupulous traders who may lie and say you have to pay in your own currency.

In your case, if you were not allowed a choice of currency when you paid for your transactions, you can report the trader to Visa or MasterCard for breaching their terms and conditions. You could also write to the head office of the retailer and ask for a refund of the extra amount you believe you have paid.

That said, you may well find that at some stage – albeit in extremely small print – you have agreed to DCC. You will also have received a receipt at the point of sale in sterling – although you may not have noticed this at the time.

In future, you must make sure you ask for the transaction to take place in the local currency before the retailer keys the amount into his machine – and thus has no excuse to start bleating that it's too late to change it.

If you need help from our consumer champion, write to Annie Shaw at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS or email . We cannot return documents, give personal replies or guarantee to answer letters. We accept no legal responsibility for advice given.

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