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Last Updated: Saturday, 22 April 2006, 09:27 GMT 10:27 UK
Card customers face hidden costs
By Chris A'Court
BBC Radio 4' Money Box

A woman pays for a purchase with her credit card
Customers are supposed to be given a choice as they pay

People using credit cards abroad are losing out through retailers who immediately convert their purchases into pounds rather than charge them in the local currency.

The practice is common in Spain, France and Italy but can happen elsewhere.

Card customers should be given a clear choice at the till to opt to be charged in either euros or UK pounds.

Now the firms that provide credit cards say they are carrying out mystery shopping exercises to spot those who flout the rules.

They are also introducing improved technology which should help stop consumers being ripped off.

On a trip to continental Europe over Easter, Money Box listener Richard Lawrence found that hotels and shops he used were all converting his purchases immediately into UK pounds.

He told Money Box: "No choice was offered, the matter wasn't even brought to my attention. Their attitude seemed to be you're from the UK - you should be paying in pounds."

Dynamic conversion

This practice where foreign merchants can convert purchase prices into pounds at the tills is called Dynamic Currency Conversion, or DCC.

Retailers should tell customers they have an option to pay in pounds or local currency but travellers may not understand the language.

Often merchants are relying on customers reading that they have a choice on the credit card slip when they come to sign.

But that is after they have made the currency conversion at a less favourable rate than if the person paid in euros and allowed the card company to convert it later.

Visa and Mastercard, who run the card systems, cannot stop merchants converting at the tills because that would fall foul of regulatory and anti-competition rules.

Worse off

Nationwide's card has always been one of the best to use abroad because unlike most others it does not impose a "foreign currency conversion charge" of 2.75% whenever someone uses it.

Money Box listener Richard Lawrence found that by using the card abroad and agreeing to the currency conversion at point of sale you can end up around 4% worse off on each transaction.

Whoever has the authority to do something about this should ensure it is regulated properly
Mr Lawrence

The situation is more complicated for people using other cards because by converting at point of sale customers will be avoiding the currency conversion charge they would normally pay.

It is possible to even save money if merchants abroad offer a competitive conversion rate at the point of sale.

But in most cases card customers will probably be better off exercising their right to be charged in euros when abroad and not in UK pounds.

Mr Lawrence told the programme: "Whoever has the authority to do something about this should ensure it is regulated properly."

Visa Europe's head of compliance, Stanley Scoglund, said the firm was concerned to hear what was happening as the company demands full transparency from merchants.

He said Visa was carrying out spot-checks on merchants and was gradually introducing technology to allow customers buying abroad to get full information on exchange rates on credit card terminals each time they make a purchase.

BBC Radio 4's Money Box was broadcast on Saturday 22 April 2006 at 1204 BST, and was repeated on Sunday, 23 April, at 2102 BST.

Money Box



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