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Should you pay in local currency when spending outside India?

Whether you're buying a souvenir at Buckingham Palace or paying for a bus tour in Canada, you may be asked if you want to pay in Indian rupees or the local currency.

It might be tempting to settle for the amount you're offered in Indian rupees (INR), as it's the currency you know best. But did you know that in most cases it will cost you more?

How dynamic currency conversion works

Dynamic currency conversion (or DCC) is what happens if you choose to pay in your home currency rather than the local currency. It means the conversion takes place at the point of sale.

What happens when you pay in rupees?

By paying in your home currency, you'll know more accurately how much things are costing as you pay. However, it can be more expensive.

DCC allows a shop or restaurant to set its own exchange rate. Some retailers are given an incentive to use DCC to earn more. This may be through a favourable exchange rate or extra conversion fees.

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What happens when you pay in local currency?

Research shows that in most cases you can save by opting to spend in the local currency. For example, that would mean choosing sterling pounds in the UK or dollars in Canada.

When you choose to pay in the currency of the region or country you're visiting, your credit card issuer will set the exchange rate. Your bank may also charge a fee to carry out the transaction.

The rate used by your card provider when paying in local currency will in most cases be lower than that of the merchant, or foreign bank, when paying in rupees.

Some retailers outside India might automatically assume you want to pay in rupees unless you say otherwise, so always double check the amount before paying.

Choose to pay local, every time

As the saying goes: "When in Rome, do as the Romans do"! Always choose the local currency of the country or region where you're spending money to avoid paying extra currency conversion fees. This goes for ATM transactions as well.

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