Dynamic Currency Conversion: Why You Should Always Pick Dirhams

You are abroad, you tap your card, and the terminal asks whether you want to be charged in dirhams or in the local currency. It sounds like a courtesy. It is a paid service, and you are the one paying for it.

Always choose the local currency of the country you are standing in. Choosing your home currency at the terminal is called dynamic currency conversion, and it lets the merchant's payment provider set the exchange rate instead of your card network. That rate normally includes a markup that you never see broken out.

What the prompt is really asking

Two different organisations can convert your purchase.

The first is your card network and your bank. They convert at the network rate and add whatever foreign transaction fee your card charges, which is disclosed in your card terms.

The second is the merchant's payment provider, standing at the till. If you pick your home currency, that provider does the conversion and chooses the rate. The difference between their rate and the network rate is their margin, and it does not appear anywhere on your receipt as a fee.

The offer is presented as certainty: you see the dirham amount before you approve. That is genuinely the only benefit, and it is a small one.

Why the dynamic currency conversion markup is hard to spot

Currency markups hide well because most people have no reference rate in their head. A receipt that says one hundred of something converted to a dirham amount looks like a fact rather than a price.

The way to see it is to compare. If you make two similar purchases on the same day, one in local currency and one converted at the terminal, then look at both on your statement, the gap between the effective rates is the cost of the convenience. Do it once and you will not need to do it again.

Markups vary by provider and by country, so there is no single figure to quote. What is consistent is the direction: the terminal's rate is offered because it is profitable to offer.

The sentence to give the cashier

You do not need an argument. You need one line, said pleasantly.

"Charge it in the local currency, please."

If the terminal has already defaulted to your home currency, ask them to cancel and run it again. Staff are usually happy to, since the choice is yours by design and most systems allow a re run.

Online, the same choice appears as a checkbox or a currency dropdown at checkout. The same answer applies: pick the merchant's own currency.

Where it shows up besides shops

The prompt is not limited to restaurants and retail. It appears in three other places that catch travellers out.

• ATMs abroad, where the machine offers to dispense in your home currency at its own rate, on top of the charges a cash advance already carries
• Hotel checkout, where a bill converted at the desk can carry the markup on the largest transaction of the trip
• Online bookings for flights and accommodation, where a site detects your location and helpfully offers a familiar currency

The hotel case is worth watching, because the amount is large and the conversion happens while you are focused on leaving.

What you still pay either way

Choosing local currency does not make the transaction free. Your own card may charge a foreign transaction fee, and that is a real cost set by your issuer. Fees differ by card and by bank, so check yours before a trip. Some cards charge nothing on foreign spending, which makes them worth carrying for travel even if they are unremarkable at home. That same fee decides whether a prepaid multi currency card beats the credit card you hold.

The point of declining the terminal's offer is to pay one disclosed fee instead of one disclosed fee plus one undisclosed markup.

Before the next trip

Two things are worth doing. Find your card's foreign transaction fee in its terms, and decide which card you will use abroad. On a longer trip the fee compounds quickly, which is visible in what two weeks of spending in India costs on a UAE card. Then, at every terminal, pick the local currency.

That is the whole habit. It takes no effort once, and it saves a little on every purchase for the rest of your travelling life.