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From flights and hotels to food and sightseeing, costs can add up quickly when you’re traveling, especially if you’re planning an international getaway. But one travel expense you may not have built into your budget is foreign transaction fees.
These fees can run anywhere from 1 percent to 3 percent of each credit card transaction you make, meaning you’ll run into them whenever you make purchases using your credit card outside of the U.S. Choosing a card with no foreign transaction fees is one of the best ways to avoid these costs quickly piling up while you’re abroad.
Let’s take a closer look at what foreign transaction fees are and how using the right credit card can help you avoid them.
What are foreign transaction fees?
Foreign transaction fees are a surcharge credit card holders pay for transactions processed outside of the U.S. These can be purchases you make while traveling abroad or even online spending from a merchant based overseas.
These fees are often a combination of two charges. One comes from the card issuer — for example, Chase, Bank of America or Citi. The other is from the network: Visa, Mastercard, Discover or American Express. Note: Discover and American Express are both card networks and issuers.
How much are foreign transaction fees?
Every credit card will have varying terms that dictate how much a foreign transaction fee will cost, so it’s important to review your credit card’s terms and conditions to know exactly how much you’ll be paying.
You can usually find this information in the “Pricing and Terms” or “Rates and Fees” section of your cardholder agreement. You should see the exact percentages charged for these fees under the “Fees” section.
Foreign transaction fees generally range from 1 percent to 3 percent and tend to average around 3 percent of each transaction. Paying around $3 per $100 you spend may not sound that expensive, but these fees can add up if you’re making a lot of purchases with your credit card.
Credit card foreign transaction fee chart
Here’s a breakdown of foreign transaction fees for major issuers. These are the fees that apply if your card lacks a no foreign transaction fee benefit:
|Issuer||Issuer fee||Network fee||Total foreign transaction fee|
|Bank of America||2%||1%||3%|
Should you use a credit card when traveling?
While it’s important to keep foreign transaction fees in mind, don’t be scared off from using a credit card while traveling internationally. There are a lot of benefits.
Plus, you can avoid paying foreign fees if you pick up the right credit card before you travel. Make sure to compare credit cards to see which option might offer the most perks for your needs, including no foreign transaction fees. The best travel credit cards and rewards cards let you earn cash back, airline miles, hotel points or flexible rewards for each dollar you spend.
Besides the potential to earn rewards, using a credit card overseas is a great way to protect your purchases with zero fraud liability coverage. If your credit card is lost or stolen abroad, you won’t be on the hook for a single cent of fraudulent purchases.
How to avoid foreign transaction fees
Foreign transaction fees increase the cost of your purchase without adding any value. Fortunately, you can eliminate or reduce the fees you’ll pay with a little planning. Here are a few suggestions to get you started:
Get a credit card that doesn’t charge foreign transaction fees
Applying for a card that doesn’t charge foreign transaction fees before your trip or overseas purchase is an ideal option for avoiding additional fees while traveling. If you’re considering opening a new card, make sure the specific card you choose has no foreign transaction fees. Just because an issuer notes a foreign transaction fee it doesn’t mean your specific credit card will charge you one. There are plenty of credit cards that don’t have foreign transaction fees, even if their issuers have them. Check out our list of the best travel credit cards for plenty of examples of cards with no foreign transaction fees.
Exchange your money before leaving
If you decide to stick primarily to cash while traveling, exchange your U.S. dollars for your destination’s currency before leaving the U.S. Doing so can be more convenient and less costly than waiting until you’re abroad and may cost less than foreign transaction fees.
When exchanging your money overseas, you could run into challenges, especially if you don’t know the country very well. You could experience long wait times, have difficulty finding a nearby currency exchange or face exorbitant fees when changing currencies.
Open a bank account with no foreign transaction fees
Opening a bank account that doesn’t have foreign transaction fees can be useful if you need to use your debit card or get cash from ATMs overseas. When you withdraw cash abroad, you could be charged both international transaction fees and out-of-network ATM fees.
Another option is to use a bank account that reimburses fees for international ATM usage, such as Schwab Bank’s Investor Checking account. The only caveat is that you have to connect your account to a Schwab brokerage account. As a bonus, Schwab also doesn’t charge foreign transaction fees.
The bottom line
Card issuers typically charge foreign transaction fees on overseas transactions. However, you don’t necessarily have to take on this expense with international credit card spending.
If you plan to travel outside the country, you can save money by using a credit card that’s accepted where you’re traveling, doesn’t charge foreign transaction fees and offers benefits for frequent travelers.
For more travel tips & tricks, check out Bankrate’s travel toolkit.