Going Abroad: Foreign Transaction and Currency Conversion Fees
Avoid excessive travel costs and the baggage that comes with it
The suitcase has been meticulously packed. Your passport was finally renewed. Nice photo, by the way. That’s everything, right? Well, not exactly.
Before you travel abroad, there are a few things you should know. First, it’s important to familiarize yourself with foreign transaction fees and dynamic currency conversion fees. Secondly, develop a plan to help avoid them.
Why Should I Care About Foreign Transaction Fees?
Let’s say you visit Japan, a country renowned for (among many things) quality electronics. While in Tokyo, you decide to purchase a new digital camera to document your trip. But if you’re paying with a credit card, you could be charged a foreign transaction fee. This is sometimes referred to as an international transaction fee or an “FX fee.”
These fees, which can sometimes be as much as 3% of the purchase price, are tacked onto your bill whenever a transaction goes through a foreign bank or is made in a currency other than the U.S. dollar. It’s important to note that some travel cards don’t charge foreign transaction fees.
What About Dynamic Currency Conversion Fees?
It doesn’t end there. You’re traveling internationally and that camera costs 8,000 Japanese yen—how much is that in U.S. dollars? It can be difficult to calculate exchange rates at the point of sale.
So, foreign merchants will sometimes offer to perform a dynamic currency conversion, or DCC. This service immediately converts the foreign price to your local currency, giving you a better idea of how much money you’re about to spend. Sounds nice, right? Well, there’s a catch. Merchants aren’t offering this as a public service—they’re charging a significant fee to do it, sometimes as much as 7% of the purchase price.
But I Can’t Be Charged for Both, Right?
Actually, you can. For example, if you use a credit card that does charge foreign transaction fees, and you request a dynamic currency conversion, you could wind up paying an additional 10% (3% in FX fees and 7% for DCC) on top of the purchase price. 10%—that’s one expensive souvenir. Imagine the costs you’d incur if you did that on every transaction: For every $1,000 you spend, you’d be charged an additional $100 in fees.
So, Can I Avoid These Fees?
Absolutely. There are credit cards for international travel that don’t charge foreign transaction fees. You can check the fees section in a card’s terms and conditions to see whether it’s one of them. None of Capital One®’s U.S.-issued credit cards have international transaction fees.
If, however, your credit card does charge foreign transaction fees, you may want to pay with cash when you can and use a debit card that charges low rates for international ATM transactions. (Some banks may charge a fee for using an ATM in another country, for using an out-of-network ATM or for converting paper currency—so monitor your account transactions to keep track of any unexpected fees you encounter on your travels.)
When it comes to dynamic currency conversion fees, you can take control over whether you’re charged. That’s because merchants aren’t allowed to perform a dynamic currency conversion without your permission—so when in doubt, kindly decline. If your bill is converted to U.S. dollars without your permission, ask the merchant to void the transaction. You can also download a free currency conversion app that easily calculates a variety of foreign currency rates, allowing you to make faster, more informed decisions.
Travel can be a great way to relax, to expand your mind and to have new experiences. The last thing that you want to come home to is a credit card bill or bank statement filled with unexpected fees. So before you leave for your trip, make sure you understand foreign transaction fees—and that you can anticipate and avoid other common travel-related fees.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.