A guide to foreign transaction fees
Key takeaways
- Foreign transaction fees are surcharges paid by credit card holders on international transactions.
- These fees typically range from 1 to 3 percent of the total purchase.
- Although international credit card fees may not seem important in small doses, they can add up over the course of a trip.
- Choosing a credit card with no foreign transaction fees is the best way to avoid these fees while traveling.
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 that credit card holders pay for transactions processed outside of the U.S. These can be purchases you make while traveling abroad or shopping online with an international retailer.
These fees are often a combination of two charges. One comes from the card issuer — for example, Bank of America, Chase or Citi. The other is from the network: American Express, Discover, Mastercard or Visa. It is important to note that 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. Note that issuers’ individual cards may vary; these fees only apply if your specific card does not have a no-foreign-transaction fee benefit.
| Issuer | Issuer fee | Network fee | Total foreign transaction fee |
|---|---|---|---|
| American Express | 2.7% | – | 2.7% |
| Bank of America | 2% | 1% | 3% |
| Capital One | – | – | – |
| Chase | 2% | 1% | 3% |
| Citi | 2% | 1% | 3% |
| Discover | – | – | – |
| Wells Fargo | 2% | 1% | 3% |
How to calculate foreign transaction fees
Determining how much you owe in international credit card fees is relatively simple. Let’s look at an example.
Let’s assume you travel to France and make a purchase totaling €150 at a souvenir shop using a Chase Freedom Unlimited® card. This card charges a total foreign transaction fee of 3 percent. So, the foreign transaction fee on this purchase would cost you €4.50 (€150 * .03 = €4.50). When converted to US dollars, that’s about $4.90 at the time of publication — which doesn’t seem like much.
However, let’s assume you spend €3,000 on the same card over the course of your trip. Now, you’ll end up paying €150 (or $163.27 USD) in unnecessary international credit card fees that provide absolutely zero value. As you can see, these foreign transaction fees can add up quickly.
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 to using travel credit cards. Plus, you can avoid paying foreign fees if you pick up the right credit card ahead of your trip.
Before you go, 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 is an ideal option for avoiding additional fees while traveling. If you’re considering opening a new card before an international trip, make sure the specific card you plan to use has no foreign transaction fees.
Additionally, just because an issuer notes a foreign transaction fee 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 no foreign transaction fee credit cards for plenty of examples.
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 it 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, however, 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.
Avoiding foreign transaction fees when shopping online
Our global marketplace means a no-foreign-transaction fee card could matter even if you never leave your couch — you can also be charged when shopping online if the merchant is based overseas.
This very thing happened to Brooklyn Lowery, a senior credit cards editor at Bankrate. “My husband had ordered an electronic notebook online, and he asked me, as he usually does, which card he should use for a big purchase. I replied, ‘Chase Freedom Unlimited® is fine.’ Turns out it wasn’t fine; it cost us $19. It wasn’t clear at checkout, but that merchant was based overseas. Lesson learned. We check more carefully now before making online purchases with new merchants.”
It’s important to know all of your credit cards’ terms and fees, including any foreign transaction fees — even if you aren’t a globetrotter, as these fees can really add up if you find yourself shopping internationally frequently. If you plan to make a purchase online, always check to see where the merchant is based. To avoid paying the fee, use a different card when shopping on that site or see if you can find the same product from a U.S.-based merchant.
Are foreign transaction fees deductible?
Like personal cards, business credit cards may also charge foreign transaction fees. These fees generally range from about 1 percent to 3 percent on transactions that you or your employees make while traveling overseas or through international merchants.
If your business ventures include frequent international travel or you make a lot of purchases through foreign merchants, paying foreign transaction fees can certainly affect your bottom line. Although international credit card fees can be deducted like any other business expense, it is still wise to avoid them whenever possible.
Thankfully, there are plenty of business credit cards that come with no foreign transaction fees. Use our list of the best business cards for travel to compare cards and find the right fit for your business needs.
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 and tricks, check out Bankrate’s travel toolkit.
