Why you should never pay in Australian dollars on overseas trips

By Chris Chamberlin, December 20 2018
Why you should never pay in Australian dollars on overseas trips

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This article is part of our ongoing Business Travel 101 series for newcomers to the world of business travel.

When using your Visa or Mastercard debit or credit card overseas to make purchases or ATM cash withdrawals, you may be asked if you’d like to pay in Australian dollars rather than the local currency – and while it might sound like you’re being done a favour, it’s quite the opposite.

Accept the offer of AUD and you’ll actually wind up paying more for the same purchase; may still be charged an international transaction fee by your credit card issuer; and could even end up earning fewer frequent flyer points on that same spend.

Here’s why you should always say no to “Dynamic Currency Conversion” (DCC) when overseas to avoid being ripped-off in cash and short-changed on credit card points.

1. Dynamic Currency Conversion costs you more

Businesses offer DCC for one reason – to make extra money, turning credit card processing from a cost of doing business into a revenue generating exercise at its customers’ expense, by applying a less-favourable exchange rate than you’d have otherwise paid through your home bank, and booking the difference as profit.

For example, when using a Visa card to pay for a quick lunch in Hong Kong recently, the credit card terminal provided two choices for payment – HKD$85 (selected), or AUD$15.59…

… but a check of Visa’s online exchange rate calculator on the same date showed that HKD$85 would have otherwise been converted to AUD$14.93.

In other words, the AUD exchange rate here was padded by a 4.42% margin in the business’ favour – equivalent to paying a 4.42% credit card surcharge when choosing to pay in AUD, but not when paying in the local currency.

For people who travel abroad regularly, that hidden surcharge can really add up: especially so on larger purchases, such as when settling your hotel bill at the end of your stay.

On a folio worth AUD$1,000, a 4.42% foreign exchange margin would cost you an extra A$44.20 when settling your bill, compared with paying in the hotel’s local currency and letting the bank handle the conversion.

2. DCC doesn’t escape your bank’s international transaction fees

It’s no secret that most credit card issuers in Australia charge an international transaction fee of around 3% when shopping abroad, but what you might not realise is that you’ll generally pay this fee whether your overseas transactions are processed in a foreign currency, or in AUD.

For instance, Australia’s largest credit card issuer, the Commonwealth Bank, charges the same 3% international transaction fee when overseas purchases are made in foreign currencies and also on “transactions in Australian dollars but with an overseas connection”, including “when you make a purchase or obtain a cash advance in Australian dollars while overseas”.

Other major banks in Australia adopt similar policies, so choosing to pay in AUD when abroad won’t negate this bank-levied charge: you’ll actually be stung twice – once at the point-of-sale via the less-favourable exchange rate, and again by your bank when being charged an international transaction fee on the same purchase.

That means paying in Australian dollars overseas could actually be costing you around 7.42% more than the transaction’s true value – 4.42% via Dynamic Currency Conversion, and a further 3% as charged by most banks – so even though paying in the local currency overseas won’t completely eliminate these costs, it’ll still reduce them by more than half.

Not all Australian banks impose international transaction fees on credit and debit card purchases, of course, but the vast majority of Australian cards have this type of fee attached, making it a double-whammy when you pay in AUD overseas.

3. You may earn fewer credit card points when choosing AUD overseas

When it comes to earning frequent flyer points from your credit card, some Australian banks offer a higher number of points per dollar spent on overseas purchases, but depending on your card, this increased earn rate may only apply to spends made in foreign currencies, so choosing AUD could cost you not only money, but also frequent flyer points.

Take the popular Qantas Premier Platinum Mastercard from Qantas Money as an example, which provides an earning rate of 1 Qantas Point per $1 spent in AUD (up to $10,000/month, 0.5/$1 thereafter), but a boosted earning rate of 1.5 Qantas Points per $1 spent in foreign currencies, uncapped.

Spend $1,000 overseas and pay in a foreign currency and you’d pick up 1,500 Qantas Points – but drop $1,000 abroad when paying in Australian dollars instead and that haul drops to 1,000 Qantas Points, or even further to just 500 Qantas Points if you’ve spent more than AUD$10,000 on the card in the same statement period.

Although this card carries a 3% international transaction fee which applies overseas on both foreign currency and AUD payments, choosing to pay in a business’ local currency when visiting another country would still save you paying up to 4.42% more for the privilege of earning up to 66% fewer frequent flyer points in return.

One final tip: always check your credit card statement

Even if you’ve meticulously chosen to pay in the merchant’s local currency every time you’ve used your Visa or Mastercard overseas, dishonest businesses can sometimes override their systems to change your currency choice after you’ve made it, particularly if your transaction was processed by signing a slip rather than entering a PIN.

That’s why you should always check your credit card statement to ensure you’ve been charged correctly – and if there’s a discrepancy, contact your credit card issuer to dispute the transaction.

I’ve had to do this on more than one occasion where overseas businesses have chosen to bill me in AUD, despite selecting their local currency when making the transaction, and have found that you can speed things up when speaking with your bank by passing along the relevant “reason code” for your chargeback request, which gets the process underway quick-smart.

For all Visa cards, you can ask your bank to process a “Visa Reason Code 76 – incorrect currency or transaction code” chargeback when Dynamic Currency Conversion has been applied without your permission. With Mastercard, you can instead request a “Reason Code 4834 – Point-of-Interaction Error – DCC Selected by Merchant or DCC Unknown/Refused” chargeback.

Your bank will then liaise with Mastercard or Visa to resolve the issue, and in some cases, may result in the card networks providing the business with further training to ensure other travellers aren’t charged incorrectly in the future.

American Express and Diners Club don't support Dynamic Currency Conversion, so this isn't a problem you'll encounter when using those cards overseas: only when transacting with Mastercard and Visa at businesses that choose to enable DCC.

Also read: Five common travel scams in China, and how to avoid them


Executive Traveller may receive a commission when you apply for these credit cards via our links.

You should seek independent advice and consider your own personal circumstances before applying for any financial product.

Chris Chamberlin

Chris Chamberlin is the Associate Editor of Executive Traveller, and lives by the motto that a journey of a thousand miles begins not just with a single step, but also a strong latte, a theatre ticket, and later in the day, a good gin and tonic.

21 Sep 2011

Total posts 65

Excellent article Chris. Do you think Aussie products such as Qantas Cash and many pre load multi currency cards are also a rip off presumably using unfavorable exchange rate set by the card issuer compared to say using a MasterCard Debit directly overseas?

Travel money cards are generally loaded with fees or forex margins in one way or another, sometimes both, and the exchange rates used can be particularly poor.

Their only real upside is that you can secure your forex rate at a time of your choosing rather than at the time of your purchase, but that could equally be a negative depending on how the rate moves, and the rates you get may be less competitive than converting currency in other ways on the same date.

Air New Zealand - Airpoints

21 Jan 2016

Total posts 195

Roby - Chris is correct about Qantas Cash Card, when you pre-purchase foreign currency on the card. Qantas gets a cut of the currency purchase. The same applies to Air NZ Onesmart card.

The major advantage of paying in the local currency like S$, EURO, etc, loaded on your Qantas Cash Card to pay for goods and services, if using S$, EURO, etc, you are not charged any currency conversion fees, etc unless the transaction is using the card's default currency, in your case - A$, then you will be subject to currency conversion fees..


Qantas - Qantas Frequent Flyer

16 Jan 2015

Total posts 8

There is a slight flaw in these types of articles - the exchange rate that the banks do on your credit card is not the same as the prevailing rate on the currency sites- the banks are taking a margin as well. I had a cancelled transaction at a hotel once where they did the bill incorrectly - and the exchange rate differed from the initial transaction and the reversal 2 mins later. It got me thinking so I did a proper analysis of my credit card statement and found that the exchange rate was around 3% worse than the published exchange rate. So the gap is not as large as it appears. It is still more expensive to use DCC, but not that much.

Hi DP, the exchange rates compared here were between those offered by the merchant, and those offered by the Visa card network for the same conversion on the same day, as published on the Visa website (not the generic ‘published rate’ found on various currency sites), because I’ve always found Visa’s own forex calculator to be spot-on for my card - and after the amount has been converted, the bank applies its regular international transaction fee on the AUD figure.

(Depending on the card network, the exchange rate can also be influenced by the transaction settlement date if it differs from the transaction date, but that’s not something we’ll look at here.)

While the precise exchange rates used can vary between banks (some apply their own margin to the rate, some don’t), this is simply a comparison between the currency being converted via DCC at POS, and being converted by the card network instead (when paying in the local currency), to illustrate an example.

Air New Zealand - Airpoints

21 Jan 2016

Total posts 195

Hi Chris. I agree with your comment. The exchange rate that is used by Visa or Mastercard as the point the transaction is approved, is the cheapest rate that is available compared to what banks, currency exchanges outlets, etc offer.

21 Sep 2011

Total posts 65

Might have something to do with when the transactions actually post to statement. My understanding is the exchange rate used is always when it actually posts not when the transaction occurs.

Qantas - Qantas Frequent Flyer

08 Nov 2014

Total posts 12

Good article. I did a similar analysis when traveling through UK, Spain and Portugal in July/August this year. The potential additional cost to me had I chosen the “pay in Australian dollars” option, would have been significant over the seven weeks of our travel.

Qantas - Qantas Frequent Flyer

19 Nov 2011

Total posts 246

Thanks for the article and the "Reason Codes". This will be very helpful when those phone calls are made to the bank.

I never knew how to dispute them as the merchant selects "Yes" on my behalf so quickly on DCC without asking me first and the receipt is issued. I could dispute but dealing in foreign language can be a challenge.

04 Jun 2018

Total posts 16

Hi Chris, good article indeed! A few months ago I paid for a coffee in Mexico City using my Aussie debit card and found it strange that the receipt came out in AUD even though I hadn’t approved of or been asked about the dynamic conversion. I tried to argue in Spanish and the cashier kept saying it was the POS-machine default’s option and there was nothing else to do. After reading your article I’m inclined to believe that it was rather in the interest of that coffee shop to profit from DCC. Do you know if in the case of a debit card the transaction could also be disputed using the same reason codes as for credit cards ? Or if it’s completyely out of question for debit cards since transactions are settled virtually instantaneously ? Cheers

That's a question best-asked of your card's issuing bank, because it'll depend on the type of card, how much time as passed (if it was a few months ago, the deadline for lodging a chargeback could have passed) and how you completed the transaction, but there's no harm in asking, of course.

Paywave and PayPass can be handy ways of avoiding the problem in the future, if they're available, because the option to pay in another currency is generally not offered on these transactions unless above the threshold where a PIN is required.

Qantas - Qantas Frequent Flyer

02 Jul 2011

Total posts 1390

Great article Chris, particularly the reason codes. Reportedly some machines, particularly in China, are very hard to override to get local currency.

Think the worst I've seen was at a hotel in Macau where the margin was close to 10%.

Ouch - that's quite a hit, even more so the longer or more expensive your stay!

Qantas - Qantas Frequent Flyer

04 Dec 2012

Total posts 6

I paid on Mastercard Black for some accommodation in Portugal last month - the AUD offer on the terminal was $1,234 but I wisely opted for the EUR rate quoted, and the conversion on my statement this month came to AUD936. The difference is staggering and a real warning to everyone.


11 Jul 2014

Total posts 533

I would like to know the best way of paying oversea, all I know is I’m going to get touched one way or another

Virgin Australia - Velocity Rewards

20 Nov 2017

Total posts 104

You won't get touched up if you pay in the local currency using a CC with no international transaction fees (eg 28 Degrees mastercard).

Qantas - Qantas Frequent Flyer

06 May 2015

Total posts 3

Thanks Chris, very helpful advice

18 Sep 2018

Total posts 2

Thanks for the article Chris as this is a pet dislike of mine. My Korean Samsung Card App allows me to block all KRW transactions from outside Korea (they decline) and I'd love to see this feature on my Australian cards.


Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 65

Update on UBank Ultra Card: Just tried it for the first time since they announced no ATM or o/s transaction fees. Tested the card for purchases and ATM cash withdrawal in Belgium and Finland, and it looks like it’s true about the no fees: the rate I got is exactly the published Visa AU exchange rate of the day to 4 decimal points. Winner!

(as an aside have also been using a Qantas Cash card - their rate looks to be the Visa rate plus about 4%)

18 Nov 2015

Total posts 121

Always tell the person serving you that you want to pay in local currency and have them make that selection on the terminal. On a recent trip to Poland I was handed the terminal a few times and the screen gave me a selection to either pay in local currency or AUD, but it was in the local language and confusing to understand what you do and after a few seconds would default to AUD. So I just made a point thereafter of telling all wait staff I want to pay in the local currency.

Virgin Australia - Velocity Rewards

11 Dec 2016

Total posts 62

Or you can use ING bank so no fees are payed.

Getting a rebate on ATM withdrawals or purchases means it's free.
Yes, it's still important to pay in the foreign currency though still.
I do have the option when paying for stuff online too where PayPal also asks the same question about charging in AUD and I choose not for the same reason as given in the article. If I do use my ING card for purchases on PayPal that is, if I use a different card then I wonder what is the best deal. Haven't found an exact answer anywhere if the PayPal transaction currency conversion of I think 3.5% or so is a good deal or not though.

Qantas - Qantas Frequent Flyer

05 Jun 2014

Total posts 177

+1 ING Orange Everyday is a great option if you're not playing the FF point game.

Virgin Australia - Velocity Rewards

09 Aug 2016

Total posts 21

I had a hotel in Ireland charge me in AUD earlier in the year without asking me. When I saw it on the receipt I had them reverse it and charge me in EUR. Was about $30 difference.

02 Feb 2018

Total posts 5

Timely piece. Just had this dilemma in Thailand and did both to compare the difference, coming to the same conclusion as Chris. Always go the local currency



21 Jul 2016

Total posts 37

I completely agree with the article. I have an NZ credit card and in Australia I always ask for NZ dollars. Also avoid a reversal. Currency buy and sell rates are different so it's an instant loss.

04 Dec 2013

Total posts 144

I've hated the scumbags at Melbourne arrivals duty free ever since the lady airily said "oh, that's come up in Euros." She refused to reverse it and I had to take the hit as I could see the queue at immigration building up.

I compared their rate with the rate my bank (in Europe) would have given on the same day, and the difference was close to 10%. And my bank charged me a "conversion" fee in any case.

It's such a blatant scam it should be illegal.

17 Sep 2015

Total posts 391

With that, if you still have the receipt, why not complain to Melbourne Airport management? In the past they've had that so-called 'High St prices' guarantee, but I don't know anyone who's used that to their advantage.


15 Jun 2016

Total posts 14

EdS wrote - I completely agree with the article. I have a NZ credit card and in Australia I always ask for NZ dollars.

I think you have completely missed the point, if you are in Australia with a NZ credit card then you should be asking to pay in the local currency AUD, not NZD

Chris's opening comments edited to suit NZ residents.

When using your Visa or Mastercard overseas you may be asked if you’d like to pay in NZ dollars rather than the local currency (AUD) – and while it might sound like you’re being done a favour, it’s quite the opposite. Accept the offer of NZD and you’ll actually wind up paying more for the same purchase


Qantas - Qantas Frequent Flyer

14 Sep 2012

Total posts 327

I’ve moved all my overseas transactions to 28 Degree Mastercard always pay in local currency and never use cash (except in taxis in HKG and other similar culprits), and checking my charges with 28c on the go I’m getting an excellent fx rate....and no 3%!!!

Comparing all travel cards including Qantas and wow how they gouge you with their cut (pun intended)!

Cathay Pacific - The Marco Polo Club

02 Jul 2018

Total posts 43

It's always a rip off when you spend overseas currencies. No matter you transfer money out of Australia or buy from Amazon US store. That's why I always nominate their local currency in online stores and try to bring golden bank notes to overseas and exchange at destination.

Royal Commission should look at that. ;)

Virgin Australia - Velocity Rewards

20 Nov 2017

Total posts 104

Not always. If paying overseas, pay in the local currency using a 28 Degrees credit card and you are getting a very fair deal.


Qantas - Qantas Frequent Flyer

23 Sep 2017

Total posts 147

Thanks Chris. Well said.

I was stupid enough in past to thinks was a good option.
Merry Christmas to you and the team as well.

12 Dec 2012

Total posts 1000

The first time I encountered DCC was at a duty free shop at SIN airport a number of years ago. I thought it was good and could avoid all the forex fees. Then I found out what it was. I've always refused it since.

It's getting more widespread, especially in Asia. During trips before this year, I had been 'lucky' to see it once. This last trip, I saw it offered a dozen times across Japan, Taiwan and Singapore.

Virgin Australia - Velocity Rewards

11 Dec 2016

Total posts 62

I see a lot of people talking about the 28 Degrees card. Not many mention the ING card (credit and to a lesser benefit the debit as a secondary fallback).

Been using ING for ages, and its my essential traveling tool.
Would love to see a comparison maybe of the 28 Degrees, ING cards and the Citibank choices, + others that I'm not aware of.

As I can't see any difference between the 28Deg and ING directly. Hard to see a direct rates comparison though unless someone owned both cards. Haven't really looked into Citibank much though, but open to look at all choices.

Is a financial traveling tool card comparison something that Ausbt might be looking at in the future as an article of interest??

Virgin Australia - Velocity Rewards

11 Dec 2016

Total posts 62

No international fee card comparison review I meant to say.

Qantas - Qantas Frequent Flyer

05 Jul 2017

Total posts 5

I have an ANZ Travel Card which I just load with AUD when I travel internationally. I leave it in AUD through my trip. If I need cash when in a foreign country I put the card in an ATM and collect the local cash. Same if I am paying for a purchase with it, the amount is shown in local currency and I just complete the transaction. Is this the smartest way I should be doing things. I didn't want to 'muck around' putting other currencies on the card.

Qantas - Qantas Frequent Flyer

12 Nov 2014

Total posts 1

Please delete the company names if inappropriate. When booking a car in England from Australia with Avis (twice) I was quoted in UK£. When dropping off the car I was told the bill would be emailed to me. It was, but in A$, and the exchange rate was not good. I will find out in the next month if Hertz do the same thing.

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