Should I pay in local currency abroad or in my home currency? In almost every case, pay in the local currency. When a card terminal or ATM offers to charge you in US$ or £ instead, it is using a service called dynamic currency conversion (DCC), and the rate is set by the merchant or machine operator rather than your card network. Guidance from banks and consumer groups is consistent: decline the offer. Here is how it works, what it can cost and what to do at the till. Information is as of 11 November 2026.
For information only, not financial advice.
What is dynamic currency conversion?
Say you are in Spain and your card is issued in the US or UK. At the terminal you may be asked: pay in euros, or pay in dollars or pounds? Choosing your home currency is DCC. Experian explains that in this case the foreign bank or payment provider, not your card network, converts the money at its own rate, which often includes a markup and extra fees. First direct, a UK bank, says the same: the rate and fees are set by the merchant or ATM operator, so it is often more expensive.
It feels helpful because you see a familiar number. But you are paying for that comfort through a worse exchange rate.
Why local currency is usually cheaper
If you pay in the local currency, your own card issuer does the conversion using the Visa or Mastercard rate. First direct notes these network rates are typically better than the merchant’s. Experian likewise says paying in local currency and letting your card issuer handle the conversion usually costs less than DCC.
How much more can DCC cost? Figures vary by merchant and are not published in one place. A 2016 post from the European consumer group BEUC said DCC, together with the merchant’s commission and revenue share, can raise a transaction by 5-6%. That is an advocacy group’s estimate from a decade ago, so treat it as an illustration of the risk, not a current average. The same post said British consumers abroad pay more than £300 million a year in DCC fees.
DCC markup vs foreign transaction fees
These are two different costs, and people often mix them up.
| Cost | Who charges it | Typical size (per sources) | Can you avoid it? |
|---|---|---|---|
| Foreign transaction fee (non-sterling fee in the UK) | Your card issuer | 1% to 3% (Experian); around 3% on some UK credit cards (first direct) | Yes, with a card that does not charge it |
| DCC markup | The merchant, ATM operator or their payment provider | Not fixed; BEUC estimated 5-6% in 2016 including commission | Yes, by choosing local currency |
| Cash advance fee | Your card issuer (credit cards) | Varies by issuer | Use a debit card or a card with no cash fee |
One trap: first direct points out that the non-sterling fee normally does not apply if you pay in pounds, so DCC can look like a way to dodge it. But the worse rate in DCC can easily cost more than the fee you avoided. If you hold a card with no foreign transaction fee, DCC saves you nothing and still gives the merchant a margin.
How ATM conversion offers work
Some ATMs ask whether you want to be charged in your home currency or in the local one. The logic is the same as at a shop. First direct says choosing local currency avoids DCC on withdrawals and is usually cheaper. It also notes that ATM operators may add their own charges, but they should warn you first so you can cancel. Separately, your bank may add a foreign fee plus a cash withdrawal fee, so check whether your card issuer treats international ATMs differently before you go.
What the EU rules say
The EU tried to make DCC easier to compare. Regulation (EU) 2019/518 added an Article 3a to the earlier cross-border payments rules. As shown on EUR-Lex, it requires the party offering conversion at an ATM or point of sale to express the total conversion charges as a percentage markup over the latest euro reference rates published by the European Central Bank, and to disclose it before the payment starts. They must also tell you that you can pay in the payee’s currency instead, and show the amounts in both currencies. The card-payment provisions applied from 19 April 2020.
Those rules now sit in Regulation (EU) 2021/1230, a 2021 codification of the EU’s cross-border payments law that replaced the earlier texts. It keeps the same approach: currency conversion charges for card payments are to be shown as a percentage markup over the latest ECB euro reference rates, so you can compare options. The practical point is simple: inside the EU you may see a markup figure on the screen. If you do, compare it with the card issuer’s fee and remember that the local-currency option is usually the one to pick. Outside the EU, such as in the US, Asia or elsewhere, no equivalent disclosure is guaranteed.
What to do now: a practical checklist
- Before you travel, check your card’s foreign transaction fee and cash withdrawal fees. Switch to a card without those fees if you can.
- At the terminal, choose the local currency every time, even if the screen makes the home currency look like the default.
- At an ATM, decline the “convert in your currency” option and cancel the transaction if you are unsure.
- Read the receipt. First direct advises that if you chose local currency but the receipt shows your home currency, ask the merchant to void the transaction and try again.
- Online, look for a currency selector at checkout and pick the merchant’s local currency, unless your card has a documented better rate for your own currency.
- Use a phone calculator or your card app to track spending, as Experian suggests, instead of relying on DCC for convenience.
Planning other travel costs? See our guides on whether a travel eSIM is worth it, the UK ETA for Americans and ETIAS for Europe.
FAQ
Is it ever better to pay in my home currency?
Sources say it is usually worse. First direct notes the home currency does give certainty about what you spend, but it often costs more because of poorer rates and DCC fees. Certainty is rarely worth that cost.
Does a no-foreign-fee card make DCC safe?
No. A no-fee card removes your issuer’s charge, but DCC is a separate rate set by the merchant or operator. The fee-free card works best when you pay in the local currency.
What if I already accepted DCC by mistake?
Ask the merchant straight away to void the transaction and run it again in local currency, as first direct advises. This is easier before you leave the shop and before the payment settles.
Bottom line
Pay in the local currency, check your own card’s fees before you go, and read the receipt. DCC trades a small amount of convenience for a rate you cannot easily check. For information only, not financial advice.
Sources
- first direct: Is it better to pay in local currency or GBP when you’re abroad?
- Experian: What Is a Foreign Transaction Fee?
- BEUC: Paying abroad may be costing you more than it should (2016)
- EUR-Lex: Regulation (EU) 2019/518
- EUR-Lex: Regulation (EU) 2021/1230 on cross-border payments (codification)
