There’s little we dislike here at TPG more than unnecessary fees – including foreign transaction fees.
You may have noticed that when you use some credit cards abroad (or on a website not hosted in the US), an additional fee is charged on each purchase.
Let’s discuss what those fees are and how you can avoid them in the future.
What are foreign transaction fees?
Some cards are charged a foreign transaction fee when you buy through a foreign bank to process the transaction. When you transact while traveling or through a foreign website, banks may have to convert the purchase to US dollars. On some credit cards, issuers will then pass the conversion cost on to customers.
How much are foreign transaction fees?
Visa and MasterCard charge banks a 1% fee to process purchases made overseas, and many US issuers charge an additional 1-2% fee. Standard foreign transaction fees are around 3%. however, Capital One and Discover are unique in having zero foreign transaction fees on all their credit cards.
| Card issuer | Standard foreign transaction fees |
|---|---|
| American Express Foreign Transaction Fee | 2.7% |
| Bank of America foreign transaction fees | 3% |
| Barclays Foreign Transaction Fees | 2.99% |
| Capital One Foreign Transaction Fees | no one |
| Chase foreign transaction fees | 3% |
| Citi foreign transaction fees | 3% |
| Find out about foreign transaction fees | no one |
| US Bank Foreign Transaction Fees | 3% |
| Wells Fargo Foreign Transaction Fee | 3% |
Which cards have no foreign transaction fees?
Most of the top travel credit cards do not charge foreign transaction fees. In fact, it’s rare to find a card that offers travel rewards and benefits for charging any foreign transaction fees. While some issuers charge a foreign transaction fee of around 3% on some of their products, you should consider Capital One or Discover cards as they do not charge a foreign transaction fee on any of their cards.
Card issuers are required to provide potential and existing customers with access to the rates and fees associated with credit cards, including foreign transaction fees. Check your credit card’s terms and conditions to see if your card (or the card you’re considering applying for) charges a foreign transaction fee.
When looking at the Rates and Fees table, you can usually find foreign transaction fees clearly listed under the Fees section.
Foreign Transaction Fee Vs. ATM Fees
Another type of fee you may hear about when you travel is foreign ATM fees. While the two fees may apply when traveling outside the US, they are not synonymous.
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In addition, you may be on the hook for additional fees when you use an ATM abroad, including using an ATM that is not affiliated with a bank (which is usually $5), foreign currency conversion fees (which are usually (in line with foreign transaction fees at 3% including a flat fee from your bank) and additional fees charged by the owner of the particular ATM you use.
This is one of the reasons why we recommend paying by credit card wherever possible. But in some places, cash is still king and you need to have a game plan to avoid these types of fees — or factor them into your budget.
Related: Ways to save on foreign ATM withdrawals
How to avoid foreign transaction fees
Use a card with no foreign transaction fees
The easiest way to avoid foreign transaction fees is to use a card that doesn’t charge them. TPG has a regularly updated guide Top credit cards with no foreign transaction fees that can help you find the best cards to use for your trips.
Unfortunately, cash-back cards like the Chase Freedom Unlimited® and Blue Cash Preferred® Card from American Express (See Rates and Fees) Foreign transaction fees tend to apply.
Avoid ‘dynamic currency conversion’
When using a card terminal abroad, you may be prompted to pay in the local currency or in US dollars. You should always choose the local currency.
Dynamic currency conversion is a sneaky way banks encourage you to pay in your home currency (US dollars) while abroad. However, they will usually give you a poor conversion rate, so it’s best to pay in euros, pesos or whatever the local currency is.
Related: I Fell for Dynamic Currency Conversion – Reader Mistake Story
Pay with cash
Of course, you’ll also avoid foreign transaction fees by paying with cash. But those purchases won’t earn you any rewards, and pesky fees may apply for cash withdrawals abroad.
The bottom line
The good news is that foreign transaction fees are much less common Top Credit Cards Than Ever. Hopefully, the industry as a whole is moving away from charging such fees to consumers. Until then, check your credit card’s terms and conditions to see if you’ll be on the hook for fees while you’re traveling and plan your card usage accordingly.
To avoid foreign transaction fees, choose one of the top travel rewards cards or Capital One or Discover. Also, always pay in local currency rather than US dollars to avoid poor conversion rates.
Related: Best Travel Rewards Cards
For Blue Cash Preferred Card rates and fees, click here.