Guide to foreign transaction fees

Written by
Maryalene Laponsie
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If you travel internationally, finding a credit card with low or no foreign transaction fees is crucial. But even if you never vacation outside the country, you could still get hit with these charges. Thanks to the global economy and the far-reaching internet, people can easily make online purchases in other currencies.

Understanding how foreign transactions fees work and when you might get charged is essential for anyone looking to reduce how much they spend on bank fees each year.

What is a foreign transaction fee?

Foreign transaction fees are charged by some credit cards whenever you make a purchase in another currency. Presumably, the fee is assessed to cover the card issuer’s cost to convert the price to your home currency and process the payment.

These fees can be assessed for in-person purchases made in another country as well as online purchases made on websites that charge a different currency.

How do you know if your card charges foreign transaction fees?

Even before applying for a credit card, you’ll be able to see whether it charges a foreign transaction fee and how much it is.

By law, credit card companies must include a fee disclosure table on any solicitation for its cards. That includes websites and online applications.

Look for a link with wording such as “pricing and fees” or “terms and conditions.” This link will typically open a new web browser window with a table outlining interest charges and fees. Foreign transaction fees will be listed in the “transaction fees” section of the table.

For an existing credit card, log into your online account to check your card information for fee details. If you can’t easily find the fee disclosure, call or chat with customer support to ask whether your card charges a foreign transaction fee and, if so, how much it costs.

How much are foreign transaction fees?

Foreign transaction fees are charged as a percentage of the purchase price. A fee of 3% is most common, but they can range anywhere from 1-5%.

This fee is typically assessed on the value of the purchase in your home currency. For instance, let’s say you spend €100, which is converted to roughly $110 based on the exchange rate as of this writing. In that case, a 3% transaction fee would be assessed on the $110, not the amount of euros.

Here’s a look at common foreign transaction fees from the major credit card issuers:

  • American Express: 2.7%
  • Bank of America: 3%
  • Barclays: 2.99%
  • Capital One: 0%
  • Chase: 3%
  • Citi: 3%
  • Discover: 0%
  • U.S. Bank: 3%
  • Wells Fargo: 3%

While these percentages are representative of the fees charged by credit card issuers, most companies offer at least one card with no foreign transaction fees. That said, double-check the pricing terms before applying for a specific card.

What are the benefits of no-foreign-transaction-fee credit cards?

Quite simply, a no-foreign-transaction-fee credit card can save you money.

In addition to eliminating the foreign transaction fee itself, credit cards often provide more favorable currency exchange rates. In other words, your dollars will stretch further if you make foreign purchases on a no-foreign-transaction-fee card compared to taking cash and exchanging it at the airport.

Avoid these foreign transaction fee credit card mistakes

Sometimes people overlook the possibility of being charged foreign transaction fees and other times they may end up paying more in their attempt to avoid a fee. Make sure you don’t fall into these two traps.

Assuming purchases made in the U.S. aren’t subject to foreign transaction fees

As mentioned earlier, even online purchases can result in foreign transaction fees if they are made in another currency. Assume you will be charged a fee for any purchase on a website based in another country even if it gives you the option to pay in your own currency.

Opting to pay in your home currency

For some foreign purchases – both online and in-person – you may be given the option to conduct the transaction in your own currency. However, this will almost always cost you more than if you completed the purchase as a foreign transaction.

Known as dynamic currency conversion (DCC), this option lets a retailer convert the currency for you. However, in most cases, the currency exchange rate for DCC transactions is unfavorable – i.e. more expensive for you – than if you let your credit card company do the conversion. What’s more, selecting the DCC payment option is no guarantee you won’t still be charged a foreign transaction fee by your card issuer.

What to do if you don’t have a no-foreign-transaction-fee credit card?

If you don’t have a no-foreign-transaction-fee credit card, it’s a good idea to apply for one. Even if you never travel internationally and only occasionally make purchases from overseas websites, it’s a handy tool to have in your wallet. What’s more, you can find cards with no annual fee so it can cost you nothing extra to carry one of these cards.

Top credit cards with no-foreign-transaction-fees

Here’s a look at some of our favorite no-foreign-transaction-fee credit cards:

CardName

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The CardName is one of our top picks for flat-rate travel rewards. Cardholders earn two miles per dollar spent on all purchases, and the card currently has a welcome offer that allows new accountholders to earn bonus rewards worth up to $750 in travel. Just spend $4,000 within the first three months of opening an account to earn 75,000 bonus miles. There is a AnnualFees annual fee for this card.

CardName

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It’s hard to beat the CardName for travel rewards. The card currently has a welcome offer that gives new accountholders the opportunity to earn bonus rewards worth over $900 in travel. Spend $4,000 in the first three months to earn the bonus of 75,000 points. The card has a tiered rewards system that tops out with five points per dollar spent on travel purchased through Chase’s rewards portal. Other purchases earn between one and three points per dollar spent. There is AnnualFees annual fee for this card.

CardName

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Want a card with no foreign transaction fees and no annual fee? Then the CardName might be for you. You won’t pay either of those fees plus you get unlimited 1.5% cash back on every purchase you make. Apply now, and you could earn an additional $200 in bonus cash back if you spend $500 within three months of opening an account.

CardName

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Small business owners, entrepreneurs and freelancers can apply for the CardName and earn three points per $1 spent on up to $150,000 of combined purchases in select categories each year. All other categories earn one point per $1 spent. The card also has an impressive welcome offer for eligible cardholders: Earn 100,000 bonus points – worth $1,250 toward travel – once spending $8,000 in the first three months of card membership. There is a AnnualFees annual fee for this card.

CardName

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Traveling abroad has long been a rite of passage for students, and the CardName is one way to see the world without paying foreign transaction fees along the way. Plus, this card awards 1.5% cash back on every dollar spent and comes with a very achievable welcome bonus offer. There is no annual fee for this card.

Don’t see the card that’s right for you? Check out our full list of the best no-foreign-transaction-fee credit cards to see what else is available.

Other frequently asked questions

Do credit cards automatically convert currency when traveling abroad?

Yes, any purchase made in a foreign currency will automatically be converted to your home currency by your credit card. This convenience – along with the card’s security features – is another reason to use a credit card for international purchases.

Do you need to tell your credit card company that you’re traveling abroad?

It is always advisable to tell your credit card company when you will be traveling, particularly out of the country. While not required, it helps ensure your foreign transactions aren’t flagged as potential fraud.

Should that happen, your card may be locked until you verify the transaction is legitimate. Rather than risk the hassle of declined transactions, let your card issuer know in advance where you’ll be traveling and how long you’ll be there.

author
Maryalene Laponsie
Cardratings Contributor

Maryalene is a freelance contributor to CardRatings.com and specializes in personal finance topics such as credit cards, budgeting, saving and investing. She has written professionally for nearly 25 years and is a regular contributor to U.S. News & World Report, Money Talks News,...Read more

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