DCC vs Non-DCC: Fees, Exchange Rates, and Hidden Charges

In cross-border payments, cost inefficiencies don't come from transaction fees alone, they often originate from how currency conversion is managed while making an international transaction.

Every time an international card is swiped, by a customer travelling abroad or a modern business planning to scale globally, there is a choice: pay in your home currency or pay in the local currency?

This decision determines whether the transaction follows a Dynamic Currency Conversion (DCC) path or a non-DCC path.

At first glance, DCC appears simple. It provides immediate clarity on how much will be charged in the card holder’s domestic currency. However, multiple regulatory bodies, including the European Central Bank and global card networks, have highlighted that this convenience often comes with embedded markups and non-transparent FX pricing.

Understanding the difference between DCC and non-DCC is no longer a travel tip, but rather a financial optimisation strategy for globally operating businesses.

Dynamic Currency Conversion (DCC) is a service that allows international cardholders to pay for goods, services, or ATM withdrawals in their home currency instead of the local currency. The currency is converted in real-time upon purchase. 

For instance, an Indian company pays an American vendor using a card, and instead of being charged in USD, the company pays 91,000 rupees through DCC. It often comes with mark-up charges and FX pricing. 

What is a non-DCC transaction?

A non-DCC transaction is a standard international payment where the merchant makes the payment in the local currency. The currency conversion is performed by the issuing card network (visa/mastercard) in this case. 

The exchange rate is also determined by the bank, which improves transparency and offers relatively competitive pricing.

As DCC enables real-time conversions at the point of sale, it provides merchants a convenient option and immediate option. However, the process also might involve additional costs. Here is how a DCC transaction takes place: 

1. Card detection: When an international cardholder swipes the card on a POS system, it detects the country of origin.

2. DCC/non-DCC choice: The customer has the choice of paying in their home currency or the local currency. 

3. Application of exchange rate: If the customer selects the home currency, the payment system uses a pre-set exchange rate, which is usually higher than standard bank rates. 

4. Transaction confirmation: When the customer confirms the final amount in their home currency, the transaction is processed while the service provider manages the exchange. 

How do non-DCC transactions work?

Non-DCC transactions bypass immediate conversion and process transactions in the local currency through: 

1. Process flow: The transaction is made in the local currency as the cardholder’s bank converts it into the home currency post the transaction. 

2. Application of exchange rate: The exchange rate in this case is the bank’s standard rate, and it is not converted immediately. 

3. Costs: Foreign transaction fees or conversion mark-up fees are charged by the respective bank. 

4. Visibility: The final home currency amount is revealed in the monthly bank statement.

Cross-border payments actually involve more than just conversion, which is where the structural differences between DCC and non-DCC in terms of fees, exchange rates, and pricing transparency become crucial. Each of them is mentioned below: 

DCC vs non-DCC exchange rates

DCC exchange rates usually include:

• 5-10% mark-up charges on interbank rates 
• Extra fees 

Non-DCC transactions generally use:

• Standard bank makeup disclosed with the bank statement 
• Card network wholesale rates

DCC vs non-DCC charges and fees

DCC includes: 

• Conversion mark-up fees 
• Processing fees 
• Occasional ATM service fees 

Non-DCC includes: 

• Bank forex mark-up fees 
• International transaction fees

DCC vs non-DCC in card payments 

While both DCC and non-DCC can be used for multiple purposes, here are the most common transaction types for both:

DCC vs non-DCC in ATM withdrawals

Most ATMs offer the choice of DCC and non-DCC when you withdraw cash abroad. Here is how it works in both cases:

Advantages vs Disadvantages: DCC 

In cross-border payments, immediate clarity about conversion rates is very important for merchants. This is how DCC transactions translate into key benefits while making an international transaction: 

1. Convenience: It eliminates the need for calculating foreign exchange rates of a different country and allows users to immediately pay at the point of sale. 

2. Transparency and clarity: Customers see the exact amount displayed in their home currency, which offers clarity regarding exchange rates and bank fees. 

3. Reduced chargebacks: As the customer confirms to the DCC transaction upfront, it decreases the possibility of disputes regarding margin rates. 

4. Simplified accounting: It is easier for business travelers to report expenses in their home currency for better accounting. 

What are the disadvantages of DCC transactions? 

While DCC may appear to be a simple and convenient option, it often comes with higher margins and additional fees. Here are some disadvantages of DCC transactions: 

1. High exchange rates: The conversion rates used in DCC are often higher than standard bank rates, leading to exchange rate losses. 

2. Extra fees: DCC also includes additional fees between 3-5% along with a higher exchange rate, which increases the overall expenses significantly. 

3. Lack of awareness and availability: Customers are not always fully aware of the extra fees, which makes it seem like convenience rather than high mark-ups. Additionally, they are not always available at all point of sale terminals. 

Advantages vs Disadvantages: Non-DCC

What are the advantages of non-DCC transactions? 

DCC transactions offer real-time conversion and clarity, but non-DCC transactions deliver different value propositions. They include the following: 

1. Lower exchange rates: Non-DCC transactions use standard bank rates for conversion, which are generally lower than the rates used in DCC. 

2. Avoids unnecessary charges: Non DCC helps customers avoid extra, often hidden, on the spot mark-up fees and offers a better overall cost. 

3. Improved transparency: While the bank rate is not revealed immediately, it comes with a detailed statement later. 

What are the disadvantages of non-DCC transactions? 

While non-DCC transactions offer a better overall cost, they come with the following disadvantages: 

1. No immediate clarity: Non-DCC can make it a little harder to track transactions in real-time, as the final amount is not displayed in your home currency. 

2. Uncertain final cost: The final cost comes with your bank statement, which includes the application of standard bank rates and international transaction fees subject to your bank. 

3. Potential bank fees: Depending on the card, you may incur foreign markup fees (often 1-3%) even after bypassing DCC offer at the POS.

Even though both DCC and non-DCC have different offerings, non-DCC is usually better for international purchases because it eliminates high mark-up charges as your bank handles the conversion according to standard rates. 

How to choose between DCC and non-DCC?

It is important to read the terminal screen while making a transaction as their systems might automate DCC. Here are a few parameters that businesses and customers should consider while swiping their card:

What are the real-world examples of DCC and non-DCC?

Both DCC and non-DCC are widely used during international transactions depending on the customer’s priority. Some common real-world examples across ecommerce, travel, and ATM withdrawals include the following: 

1. International hotel checkout: You are from India and checking out of a hotel in London; the POS terminal asks if you want to pay 30,000 INR or 235 pounds- while the INR offers immediate clarity and familiarity, you end up paying more as it includes a heavy markup on the exchange rate. 

2. Retail purchase: While buying a jacket from a store in the US, the website automatically shows the price as 5,000 INR through merchant-applied DCC automation tools, which is higher than the actual price. 

3. Foreign ATM: Withdrawing cash from an ATM abroad, and the ATM immediately offers the option of withdrawing cash in your home currency. Not choosing this and withdrawing cash in the local currency results in a cost-effective, non-DCC transaction. 

Final thoughts 

Dynamic currency conversion is designed for immediate convenience, whereas non-dynamic currency conversion offers standard rates but still leaves businesses dependent on the bank’s side pricing structures. This is why controlling FX margins becomes crucial. 

As global payments increase, Xflow empowers businesses to spend smartly by creating a shift from traditional conversion models to faster, clearer, and more transparent cross-border settlements.

Both DCC and non-DCC are dependent on the card network, but while settling cross-border payments, relying on card-led FX conversions can lead to volatility, lack of transparency, and even settlement delays. This is where solutions like Xflow play a significant role. 

Xflow enables modern businesses to: 

• Receive payments from anywhere in the world with transparent FX rates 
• Reduce dependency on expensive intermediate conversion costs 
• Accelerate settlements 
• Enable bulk payouts 
• Maintain audit-ready reporting with API-integrated accounting platforms 

Receive international payments at the lowest FX rates by signing up  now!