The next time you travel over-seas and paying with your American credit card don't be surprised if the hotel clerk, wait-staff, or car rental agent gives you a bill in U.S. dollars. This practice is known as dynamic currency conversion (DCC). So what's the big deal? One might think this is a convenient way to continue the transaction as you know exactly what you are being charged in U.S. dollars. But so fast, If you accept the pre-converted bill you will end up paying a higher exchange rate and credit card fees.
Companies that use DCC use an exchange rate that is competitive but many times is actually higher than the interbank exchange rate. Add that to the fact that in 2005 most credit cards automatically add a 1% "international service assessment" for all transactions outside the United States. and that $10 cappuccino just got a little bit more expensive.
Although it may seem unsafe to carry large sums of cash with you on a trip that you converted before you left the States...you will end up saving money in the long run. However, if you decide to use your credit card demand to have your bill in the local currency. Stores are violating their merchant agreement if they refuse to let you pay in the local currency. Also, before you leave home find out what the service fees are with your credit cards...one may be cheaper than the other.
