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International travel isn’t cheap. That’s especially true when it comes to purchasing airfare. Depending on where you’re traveling, a round-trip economy seat ticket on an international flight could easily cost around $1,000. Add in the costs for lodging, food and fun, and you can quickly spend a few hundred dollars or more per day.
This may not be a problem if you’ve saved money for the trip. But you can easily bust your budget if you fail to prepare for any surprise expenses. For example, you really don’t want foreign transaction fees sneaking up on you. These are fees levied as a percentage of each transaction you make abroad. Letting these fees find their way into the equation is a sure path to putting a damper on your travels.
Here are some tips for cutting foreign transaction fees entirely for your next trip abroad.
Understanding foreign transaction fees
Foreign transaction fees are charged by a credit card issuer or bank when you use a specific type of payment to make a purchase outside your country of residence. If you live in the United States and plan to use your credit card for a bucket list trip to the Swiss Alps, you need to know that most credit cards will charge a foreign transaction fee (usually between 2% and 4% of the purchase price) for each purchase you make. Foreign transaction fees can also be tacked on to purchases you make online with overseas vendors who process your payment in their home country.
While part of this fee is charged by the credit card you use to make the purchase, the rest may be charged by the payment network processing the transaction (e.g. Visa or Mastercard).
Here’s how much you can expect to pay in foreign transaction fees with different card issuers, keeping in mind that some issuers waive their FTFs on certain credit cards:
|Issuer||Issuer Fee||Mastercard/Visa Fee|
|Bank of America||2%||1%|
|Capital One||0%||1%, absorbed by Capital One|
Avoiding foreign transaction fees
Forking over an extra 2% to 3% for each $100 you spend may not seem like a big deal on its own. But they do add up quickly, without adding any value to your card.
Fortunately, avoiding foreign transaction fees isn’t that difficult with the right tools and strategy in place. Here are some steps to consider before you depart on your next overseas trip:
Pick up a no foreign transaction fee credit card
Most credit cards do charge some sort of foreign transaction fee on your overseas purchases. The main exception being all credit cards offered by Discover and Capital One, which don’t charge any FTFs. The problem with Discover is that, unlike Mastercard and Visa, it is not widely accepted in many countries outside the United States.
Now, for the good news. Most card issuers offer an array of rewards or travel credit cards that don’t charge any foreign fees at all. Picking up one of these cards before your next overseas trip is your best way to avoid foreign fees and earn travel rewards in one fell swoop.
Here are a few of the top credit cards with no foreign transaction fees:
|Card||Signup Bonus||Ongoing Rewards|
|Citi Premier℠ Card||60,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening||Earn 3 points per $1 spent on travel including gas stations, 2 points per $1 spent at restaurants and on entertainment, and 1 point per $1 spent on all other purchases|
|Capital One® Venture® Rewards Credit Card||50,000 miles once you spend $3,000 on purchases within 3 months from account opening||Earn 2x miles for each dollar you spend|
|Chase Sapphire Preferred® Card||60,000 points once you spend $4,000 on purchases within 3 months from account opening||Earn 2x points on travel and dining and 1 point per $1 on all other purchases|
|Wells Fargo Propel American Express® card||20,000 bonus points when you spend $1,000 in purchases in the first 3 months||3X points on dining, gas stations, rideshares, transit, and travel including flights, hotels, homestays, and car rentals; earn 1x points on all other purchases|
Exchange currency before you leave
Another option to consider that will allow you to avoid foreign transaction fees is visiting your local bank and asking them to exchange currency for you ahead of time. Keep in mind that some banks may need a few weeks of lead time to have the currency you need on hand. In other words, don’t wait until the last minute!
Your bank or credit union may not charge you any fees for exchanging currency (other than the going exchange rate), but it’s also possible you will need to pay a fee for their services. If you choose this route, make sure to create a budget for your trip so you know how much cash you’ll need ahead of time. Also, ask your bank or credit union what fees they charge, if any, for the exchange.
Open a bank account with no foreign transaction fees
You can avoid foreign transaction fees on overseas ATM withdrawals with specific bank accounts. For example, Capital One 360 and Discover Bank don’t charge foreign transaction fees on foreign ATMs. Although, there’s a chance the foreign ATM may tack its own fees onto your transaction.
Consider Schwab’s High Yield Investor Checking for their unlimited ATM fee rebates worldwide and no added fees for currency conversion. Your account also comes with no maintenance fees or minimum balance requirement, if you connect it with a Schwab brokerage account.
No matter what you do before your overseas trip, make sure you’re aware of all your options through your bank and your credit cards. It’s possible you already have an account or credit card that can help you save on travel-related fees. But it doesn’t hurt to explore any new options before packing your bags.
If you do opt for a new credit card for your overseas trip, you’ll need to consider other factors, such as annual fees and rewards programs. There are numerous rewards credit cards that can help you avoid foreign fees while rewarding you for every dollar you spend.