It happens with almost every card payment abroad: the terminal asks whether you want to pay in the local currency or in shekels. It seems like a small choice, but picking the wrong option can add tens or even hundreds of shekels to the cost of your holiday. The culprit is a service called dynamic currency conversion (DCC).
What is dynamic currency conversion?
DCC lets the merchant or ATM convert the transaction into your home currency at the moment you pay. It sounds convenient – you see the exact amount in shekels – but the conversion is carried out by the merchant’s payment provider, not your card issuer, and usually at a much worse exchange rate, often with extra fees of several percent.
How much can it cost?
On a coffee, the difference may be just a few shekels. On clothes shopping it can reach tens of shekels, and on a hotel bill or a big purchase, hundreds. Airports, tourist areas and some ATMs tend to have the worst rates. Over a whole trip, it adds up.
So which should you choose?
In most cases, choose the local currency: euros in Europe, dollars in the US, pounds in the UK and so on. Your card issuer will then do the conversion, which is usually far cheaper, especially if your card has a low foreign transaction fee. Note that some Israeli card companies convert at the rate on the day the transaction clears, which may be a day or two later, so the final amount can vary slightly when exchange rates move.
The trap many people fall into
Payment screens can be confusing. Sometimes there are two questions – which currency to pay in, and then whether to accept a conversion. Many travellers press the option that approves conversion to shekels without realising it. In some cases, the cashier even selects it for you. If you see a question about currency conversion, the right answer is usually “Reject”, “No conversion” or the local currency. The same applies at foreign ATMs that offer a “guaranteed rate”.
Before you fly: check your card
Foreign transaction fees vary between cards. Check your card’s terms before you travel, and consider a card with low or no foreign currency fees.
The bottom line
Next time a terminal abroad asks if you want to pay in shekels, do not rush to press yes. Paying in the local currency will usually save you money. For more travel money tips, see our guide to the UAE dirham, and before your trip run through our packing list for travelling abroad.
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