What Are Foreign Transaction Fees?

Foreign transaction fees are charges you pay for credit card purchases made in a foreign currency, including online purchases. You might also hear them referred to as FX fees.

How Much Are Foreign Transaction Fees?

The fee is calculated as a percentage of the purchase price, usually up to 3%.

When you make a credit card purchase in a foreign country, your card network converts the foreign currency to dollars. The network, such as Visa or Mastercard, charges your card-issuing bank a fee, typically 1%, to offset the conversion cost and the risk of fraud inherent to international transactions. Your card issuer may pass that fee on to you and add its own fee of 1% to 2%.

What Are the Pros and Cons of No Foreign Transaction Fee Credit Cards?

  • Save money on purchases overseas. You can save the fee – up to 3% of each transaction, whether you’re traveling abroad or using your card for an online purchase from a merchant outside of the U.S.
  • Earn cash back or other rewards. Find a card that charges no foreign transaction fee and earns points, miles or cash back rewards for your spending. But choose a credit card that matches your spending habits to make your money go further.
  • Access other travel perks. Cards with no foreign transaction fee may include trip cancellation insurance, free checked luggage and rental car benefits, to name a few.

  • You might pay an annual card fee. The card you want could have an annual fee. If you select a card with an annual fee, make sure you will earn enough rewards to cover the charge.
  • Your card network may not have coverage. American Express and Discover aren’t as widely accepted internationally as Visa and Mastercard. When you travel abroad, bring backup cards and cash.
  • You could pay a higher APR with a rewards card. Avoid carrying a balance if you go with this type of credit card to maintain the value of your rewards.

What Is Dynamic Currency Conversion?

A process known as dynamic currency conversion allows you to be charged in dollars while traveling abroad, but you could pay a poor exchange rate and other fees for it.

At the point of sale, a foreign merchant may ask if you want to be charged for an item in dollars instead of local currency to give you a better idea of what it costs. DCC may sound good, but just decline this optional service and pay in local currency.

The fee that merchants tack onto your bill for the convenience of paying in dollars can be as high as 7% of the transaction, sometimes more. Also, some credit cards still charge the foreign transaction fee on top of the DCC fee.

Finally, you may get a better exchange rate by letting your credit card provider do the currency conversion to dollars.

How Should You Choose a Card With No Foreign Transaction Fee?

1. Determine the type of credit card you want. Many kinds of credit cards come without a foreign transaction fee, including:

2. Make sure the card is widely accepted overseas. Because of higher processing fees, American Express and Discover have lower acceptance rates worldwide than Visa and Mastercard. American Express and Discover are fairly well accepted in the U.S., Canada and Mexico but may be limited elsewhere.

3. Look for useful travel benefits. Plenty of cards with no foreign transaction fee may stand out as great travel cards with extensive travel benefits. World Elite Mastercard and Visa Signature cards, in particular, offer perks that often include:

  • Trip cancellation and interruption insurance.
  • Trip delay reimbursement.
  • 24/7 concierge services.
  • Lost luggage reimbursement.
  • Auto rental collision damage waivers.
  • Baggage delay insurance.
  • Roadside assistance.
  • 24/7 customer service.

What Should You Know About Traveling Abroad With Your Credit Cards?

Try these tips to avoid financial surprises on your trip:

  • Contact your issuer. Let your issuers know about travel plans. Otherwise, they might freeze your account for fraud when they see purchases made in a different location.
  • Use a debit card for ATM withdrawals. Using a credit card is processed as a cash advance and that means you’ll pay high interest on the amount you borrow.
  • Be aware of the exchange rate. Credit card networks typically provide exchange rates that are close to the fair market rate. But before you travel, install a currency conversion app on your phone as a quick reference.
  • Avoid dynamic currency conversion. You risk paying a much higher conversion rate on top of additional fees.
  • Make sure your card has an EMV chip. If not, ask your issuer to mail you a chip-enabled card at least two weeks before your trip. These chip and PIN cards are common in Europe, and using one there can reduce hassles at checkout.
  • Bring photocopies of your credit cards. Having copies of the front and the back of your credit cards gives you easy access to their customer service numbers if they are lost or stolen. Black out details such as your name, card expiration date and CVV number.
  • Carry backup forms of payment. Pack a widely used credit card, such as a Visa or a Mastercard, a debit card for cash, and an additional credit card in case your primary one is unusable.
  • Research your card’s travel benefits and perks. You might be entitled to benefits that can help you deal with travel mishaps, such as lost bags and trip delays. Perks might include discounted or free entry to airport lounges, priority boarding, free checked luggage, and free in-flight Wi-Fi.
  • Know how your card issuer can help in an emergency. Some issuers offer expedited card replacements, a 24/7 benefits administrator who can supply medical or legal referrals, assistance with prescriptions, and other emergency services.

Should I Use a Credit Card or a Traveler’s Check?

Before credit cards and debit cards evolved to be more travel friendly, traveler’s checks were popular. You can still get traveler’s checks, but be aware of the advantages and disadvantages before using them in place of credit or debit cards.

Advantages of traveler’s checks:

  • You can exchange them for cash or use them to pay for goods and services during your travels.
  • If the checks are lost or stolen, you don’t lose your cash.
  • They do not expire and are redeemable at the current exchange rate, often without fees.

Disadvantages of traveler’s checks:

  • Some merchants may not accept them.
  • They lack the benefits and perks of travel rewards credit cards.

Now that credit cards are widely accepted, you can use them more easily during your international trips. That’s especially true of credit cards with no foreign transaction fees. You can also save on travel by booking reservations with your travel rewards credit card.

Does a Foreign Transaction Fee Depend on Currency Exchange Rates?

The foreign transaction fee you pay does not depend on exchange rates. You also may be charged a currency conversion fee on top of a foreign transaction fee. This is why using a credit card with no foreign transaction fee can help you save money when traveling abroad.

Alternatives to Credit Cards With No Foreign Transaction Fees

  • Exchange currency before you travel. Then stick with cash instead of cards. Visit your bank before your trip and swap your dollars for your destination’s currency. You could pay a low fee or no fee.
  • Apply for a travel rewards card. Many travel cards have no foreign transaction fee and offer travel rewards and benefits. If you choose a card with an annual fee, make sure you can justify it with rewards and perks.
  • Get a debit card or a checking account with no foreign transaction fees. This will help you avoid fees for withdrawing cash from an ATM abroad.
  • Consider using traveler’s checks. These don’t have foreign transaction fees and can be replaced if lost or stolen, unlike cash.

U.S. News has been helping consumers make money decisions for decades. For our Best Credit Cards With No Foreign Transaction Fee list, we considered overall issuer satisfaction ratings, rewards earning rates, annual fees, APRs and sign-up bonus values. Satisfaction data is based on an annual nationwide survey.

To qualify for this list, a card must not charge a foreign transaction fee. Those who travel and make purchases in a foreign country or currency need a card that doesn’t charge a fee for international purchases. Choose the best card for you with no foreign transaction fee by comparing cards on this list that have other perks to enhance your travel experiences.

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