Colombia Forum

BlueSeas
Joined 2015
Posts: 379

4 years ago

Warning New ATM Surcharge

4 years ago

Everyone should be aware of Dynamic Currency Conversion (DCC) related to credit and ATM transactions. See:

https://en.m.wikipedia.org/wiki/Dynamic_currency_conversion

Basically the merchant or Colombian card processor converts your transaction from Colombian Pesos to your home currency when making the charge. There are 2 benefits, if you pay foreign transaction fees to your home bank, these are usually not charged since the transaction is your home currency. Second, the receipt clearly shows the amount charged in your home currency.

This rarely (if ever) is favorable. Visa exchanges funds at very close to the rates published on XE.com which are about the best available. The worst USA credit cards charge a 3% foreign transaction fee. Most regular international travelers have cards with no foreign transaction fees. The DCC rates I have seen are 6-8%. So if you have a 3% foreign transaction fee card, DCC costs 3-5% more. For those with no fees, it's a straight up surcharge of 6-8%.

When we first started to visit Colombia in 2011, DCC was virtually non existent. In about 2017, we started to see many restaurants using DCC by default. In theory Visa requires merchants to offer DCC as an option allowing you to select COP or USD for the transaction. But we had limited success here obtaining the local currency option. So we started paying cash when eating out.

Now in 2019, for the first time, we got charged DCC on an ATM transaction by Banco de Bogota. The exchange rate on this withdrawal should have been about at about 3215 COP per USD. Instead it was 2996 COP per USD, a big hit in exchange rate. Funny the receipt clearly states "I have been offered a choice of currencies", but if that was possible during the ATM transaction, I missed it. It was clear that DCC was going to be charged, so there was an option to cancel the transaction. Decided not to "shop ATM's" that day, but will surely do so moving forward. 2 days later, the Visa rate at about 3195 and using a ServiBanca ATM we got 3197 COP per USD.

Still haven't seen DCC at retail stores or supermarkets, but it wouldn't surprise me to see it in the future. If you are a short term visitor, DCC probably isn't worth worrying about. It's a rounding error unless you're here buying emeralds. But for those of us that are regulars living off foreign currency, this is a 6-8% surcharge to avoid.

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