When you are abroad and using your Indian credit or debit card, you may be asked whether you want to pay in Indian Rupees (INR) or in the local currency of your destination. Although choosing Indian rupees might feel easier, it often means accepting a process called Dynamic Currency Conversion (DCC), which comes with hidden costs. Paying in the local currency is almost always cheaper because if you pay in INR the merchant or payment operator gets to apply an unfavourable exchange-rate markup.
Why DCC is more expensive
The conversion rate applied under DCC is typically much worse than the bank/card-issuer rate you’d get if the transaction were processed in the foreign currency and then converted into rupees by your bank. Many merchants offering payment in INR abroad will add a margin or fee layered on top of the official rate to capture extra profit.
In contrast, if you choose the local currency, your card network converts later at its benchmark rate and your Indian bank applies its standard, published forex markup.
The hidden double hit
Even though your bank isn’t doing the currency conversion in a DCC transaction, many Indian banks still add a separate DCC fee (often around 1-1.5 percent plus GST) on top of the already worse exchange rate. That means you can be penalised twice—once via the inflated rate and again via an extra fee—making DCC poor value for most travellers.
Another factor is how the Indian rupee is weakening, which magnifies cost when you pay in INR abroad. Indian travellers using cards denominated in rupees often face higher costs because the rupee’s depreciation and variable conversion rates combine to increase spending by a noticeable margin.
Not just at shops—ATMs too
The same prompt can appear at overseas ATMs when you withdraw cash. If the machine offers to show or charge the amount in INR, decline it and proceed in the local currency. The logic is identical: letting the ATM or its provider convert to rupees usually bakes in a bigger spread than your card network and bank would charge.
The simple rule to save money
Always choose the local currency (USD, EUR, GBP, JPY, etc.) when you’re abroad, and let your card network and Indian bank handle the conversion later. Their rates and markups are clearer and, in most cases, cheaper than DCC. Over a long trip or multiple purchases, avoiding DCC can save you meaningful money.
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