Choose euros not dollars when paying by credit card in Europe

Like many Canadians I’m giving the US a miss this winter.  

We’ve returned to Portugal, a country where the weather in January is pleasant, the people are friendly and our dollar goes a long way.

We stayed in Tavira, in the eastern Algarve, which offers plenty to see and do and January temperatures between 14C and 18C. The sun shines most days, the beaches are beautiful and the food wonderful. Outdoor café life is an added pleasure. The culture has been shaped by a mix of civilizations, from ancient Phoenicia and Rome to Moorish rule and reconquest by Christendom in the 13th century. Spain is an hour away.

The Canadian dollar goes a lot farther than in the Caribbean or in the US. A constant choice when paying a bill by credit card is how to convert the payment. In grocery stores, restaurants and many stores, the first thing that pops up is the option to pay in Canadian dollars – ‘Press 1’ or in Euros ‘Press 2’

Instinctively you might choose Option 1, because after all you have a Canadian credit card, so it makes sense to pay in Canadian dollars. And it is the first choice presented, so it must be the best.

It is the wrong choice. You should always choose Euros, because if you Press 1, the conversion rate will be terrible. While you think it is being done by Visa because that’s the card you are using, it is the merchant’s payment processor, not Visa that sets the exchange rate.

It is called a Dynamic Currency Conversion (DCC). In most cases the exchange rate is inflated, by about 3% to 8%above the real market rate, according to multiple sources. There may be extra fees on top of that, including a “conversion fee.”  

Credit card issuers like Visa warn that DCC lets the merchant – not the card network – set the exchange rate. The consistent industry advice is to always pay in the local currency to avoid unnecessary costs.

When you choose Euros, Visa and Mastercard convert at near‑market rates. So always choose EUR.