Nothing can ruin a vacation like seeing your credit card bill upon returning home. Where did all those extra charges come from? Why is every purchase more expensive than you budgeted for?
The culprit, of course, is your credit card’s foreign transaction fee. Learn everything you need to know about these tricky surcharges and find out how to avoid them in the future.
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What are foreign transaction fees?
Foreign transaction fees are charges added to credit card purchases made in foreign countries.
You may also see foreign transaction fees referred to as:
- Foreign purchase fees
- Foreign purchase transaction fees
- Foreign currency fees
- Foreign currency transaction fees
- FX fees
- FTF
- INTL TXN fees
Foreign transaction fees are charged by the credit card’s issuer, as well as the processing network (e.g., Visa, Mastercard). However, the fee is charged all at once by the credit card and then distributed between the issuer and network.
When are foreign transaction fees charged?
Foreign transaction fees can be charged when:
- You make a purchase outside of the US
- You make a purchase in a non-US currency
- You make a purchase online with a non-US vendor
- You make a purchase that gets routed through a non-US bank
How high are foreign transaction fees?
While foreign transaction fees vary by credit card issuer, most charge foreign transaction fees that are between 1%–3% of the amount you spent. However, some card issuers don’t charge foreign transaction fees at all, or they offer credit cards without foreign transaction fees as a perk.
Do foreign transaction fees count toward credit card rewards?
Unfortunately, foreign transaction fees don’t count toward credit card rewards. If you’re charged a foreign transaction fee on a rewards card, you won’t get credit card points or miles awarded on the fee amount.
For example, say you take a vacation in Mexico and make a $50 purchase. Your credit card charges a 3% foreign transaction fee, so you pay $51.50 in total. You’ll only earn rewards for the $50 purchase, not for the additional $1.50 you spent on the fee.
Foreign transaction fees vs. currency conversion fees
Foreign transaction fees are not the same as currency conversion fees, although it’s easy to confuse the two. Sometimes a card’s currency conversion fee may be lumped in with its foreign transaction fee in its Schumer box.
To understand the difference, you need to understand the two types of currency conversion fees:
1. Payment processing conversion fee
A credit card’s processing network (Visa, Mastercard) will usually levy a 1% charge for converting a foreign transaction into US dollars. However, this charge is expressed as part of a credit card’s foreign transaction fee.
Take, for example, cards issued by Bank of America. The credit card issuer (Bank of America) collects a 2% foreign transaction fee. The network (either Visa or Mastercard, depending on the credit card) takes a 1% currency conversion fee. So, Bank of America credit cards will have their “foreign transaction fee” listed as 3%, even though a portion of that is actually the currency conversion fee.
On the other hand, Bank of America offers several rewards credit cards that waive foreign transaction fees. This includes waiving the currency conversion fee, meaning Bank of America won’t charge any foreign transaction fee on purchases made with one of these cards.
2. Dynamic Currency Conversion fee
The second type of currency conversion fee is called Dynamic Currency Conversion (DCC). DCC is charged when you make a foreign purchase in US dollars.
Let’s say you’re checking out at a grocery store in Italy. You swipe your credit card at the counter and the payment terminal gives you the choice between paying in euros or in US dollars. You select US dollars. Now, a DCC fee will be added to that purchase.
Why you should avoid paying DCC fees
While it’s tempting to conduct foreign transactions in your native currency (which you presumably understand better), steer clear of DCC. Opting to make a foreign transaction in US dollars will cost you more, as DCC transactions are almost always done at an unfavorable exchange rate.
A study by the European Consumer Organization showed that DCC made purchases 2.6%–12% more expensive. 1
How much do foreign transaction fees cost?
Foreign transaction fees vary by credit card issuer. The majority of credit cards charge between 1%–3%. However, some card issuers—like Capital One—don’t charge any foreign transaction fees at all.
Take a look at what major credit card issuers charge:
Foreign transaction fees by credit card issuer
| Credit card issuer | Foreign transaction fee |
|---|---|
| American Express | 2.7% |
| Apple | None |
| Bank of America | 3% |
| Capital One | None |
| Chase | 3% |
| Discover | None |
| Wells Fargo | 3% |
To help you understand how much foreign transaction fees cost, we’ve also listed a few examples of hypothetical foreign transaction fee charges.
Examples of foreign transaction fees
| Transaction amount | Foreign transaction fee | Foreign transaction fee charge | Total charge |
|---|---|---|---|
| $50 | 3% | $1.50 | $51.50 |
| $100 | 3% | $3 | $103 |
| $500 | 3% | $15 | $515 |
| $1,000 | 3% | $30 | $1,030 |
How to avoid foreign transaction fees
Foreign transaction fees can stack up quickly and become an expensive additional cost. Luckily, there are multiple ways you can still use a credit card abroad (or online) without incurring these fees.
Get a Capital One credit card
Capital One doesn’t charge foreign transaction fees on any of its credit cards. While this is also true for all Discover credit cards, Discover is less widely accepted outside the US. That’s because Capital One uses Visa and Mastercard for payment processing, which are commonly used around the world.
Get another credit card without foreign transaction fees
Other credit card issuers may charge foreign transaction fees on some cards and not on others. Major credit card issuers—like American Express, Bank of America, and Chase—all offer credit cards without foreign transaction fees.
Major no-foreign-transaction-fee credit cards tend to be geared toward jetsetters, offering credit card miles or travel-based cashback rewards, along with travel perks like airport lounge access and trip insurance. Here are some of the best no-foreign-transaction-fee credit cards available:
Ask for fee reimbursement
If you’ve recently used or plan to use a credit card abroad that charges a foreign transaction fee, call customer service and ask for those fees to be reimbursed. Surprisingly, this can actually work—credit card companies will sometimes do this as a gesture of goodwill.
While this is at the discretion of the card issuer and there are no guarantees, there’s no harm in trying.
