Purchases with a cash credit card have a 1% FX rate.
The conversion rate on my purchase was more than 1% on my card. How?
While rare, there are some other factors that may affect purchase conversion rates:
Dynamic Currency Conversion (DCC)
A feature offered at some credit card terminals—especially when you’re traveling internationally—where the merchant terminal asks if you’d prefer to pay in your home currency (e.g., USD if you’re American) instead of the local currency. It shows you the exchange rate and often adds a markup or premium, which is where they make extra money.
This is almost always worse for the customer, since:
The exchange rate is typically marked up
You might still get charged a foreign transaction fee on your card even if you chose your home currency
Your default card exchange rate is usually better than the DCC one
So it’s almost always smarter to choose the local currency and let your card do the conversion.
Time of Settlement vs. Time of Purchase
Even if the price is set when you buy, credit card transactions don’t always settle instantly. The FX rate used is often the one on the day the transaction is processed, which can be a day or two later — and rates can move in that time.
Merchant Surcharges or Processing Fees
Some merchants (especially online or in tourist-heavy areas) might tack on hidden surcharges when charging in foreign currencies or through certain terminals. This can sneak through unnoticed unless you really scan the receipt or billing details.
Refunds or Reversals
If you get a refund or a partial reversal, the FX rate might have changed by then. So you might not get back the same USD (or home currency) amount you originally spent — even if the refund is in full in local currency.
Country-Specific Regulations
In some countries, additional fees may be levied by intermediary processors, especially in emerging markets or where dual currency settlement systems are in play. Also, sanctions or capital controls can influence how currency flows are priced.
Merchant Error or Mislabeling
Sometimes, the merchant terminal might show a price in your home currency but still run the transaction in local currency or vice versa, resulting in unexpected double conversions or weird math.