Are you the type of business traveller that browses for a good deal before booking a hotel room? Or maybe you even try to use public transport over taxis, where possible?
That’s great, but all of that hard work can go to waste if you end up falling for a simple trap that could mean you inadvertently put your business out of pocket. It’s called DCC and its collectively – and unnecessarily – costing companies £99m.
The DCC trap
DCC, or Dynamic Currency Conversion, is offered by restaurants, hotels, meeting places and via ATMs overseas, giving those picking up the tab for any personal or business spending the chance to pay in their home currency.
By paying in Pounds, those on business trips may think it’s easier to keep track of their spending and budget, but many are unaware it will actually cost them more.
When cardholders use their debit, credit or prepaid card to pay in Sterling, the vendor or ATM is able to define the rate that is used to convert the transaction from, for example, Euros or US Dollars, back into Sterling.
New research by FairFX has laid bare the extent of this rip-off. Almost a quarter of transactions by employees on business trips have been subject to an extra 7.7% charge due to them being duped into paying in Pounds. Collectively this tots up to a whopping £99m in annual fees, robbing businesses of additional profits and inflating the costs of doing business internationally. That’s based on an annual spend of £5.33bn by UK business people overseas, according to ONS data.
How to avoid DCC
Luckily for businesses and employees alike, this scam and other currency rip-offs can be avoided with the help of some simple tips:
- If you’re asked what currency you want to pay in, always choose the local currency. Do the same if you’re faced with a choice at an ATM.
- You have a choice: Dynamic Currency Conversion (DCC) is optional, although it’s been reported that merchants have run this automatically, it’s actually against the terms and conditions of Mastercard/Visa.
- Be vigilant: If you’re billed in Pounds (or any other currency than the local one for the country you are in), refuse it.
- Debit and credit cards are a good backup for travel money but if you want to get a better exchange rate and keep track of staff spending, use the FairFX Expense Card and Platform. Even if you’re using a card loaded with Pounds, choose to pay in local currency to avoid third party charges and rates.
- To get the best value for money before you book a business trip, look at which destinations get you more bang for your buck with more favourable long-term exchange rates – attending a conference further away might not actually cost as much as you think.
- Set up a currency alert with FairFX so that you are alerted to the best time to buy when the rate moves in your favour.
- Whatever you do, don’t leave currency until the last minute – organising it at the last minute could also create a waste of company funds. Exchange rates at the airport can be 15% more expensive than elsewhere meaning that you could lose £147 for every £1,000 you exchange (and sometimes even more).
- Even if you are savvy enough to have a prepaid card loaded with foreign currency, be careful about taking cash from airport ATMs. When withdrawing currency from UK airport ATMs with a currency card, most of them charge you in Pounds instead of your Euros or Dollars, and hit you with hidden conversion fees. Avoid this by withdrawing cash at your destination or getting cash delivered straight to your door by FairFX.
With the FairFX Expense Card and Platform you can spend for free in the UK and get great rates overseas. You can also keep track of staff spending with ease.