What is a foreign transaction fee?
Getting ready to travel abroad? There’s a lot to take care of before you leave. Daily allowance for food? Check. Plane tickets? Already bought. Planning for foreign transaction and currency conversion fees on your trip? Wait, what?
It’s true. With some credit cards, debit cards and even prepaid cards, fees may be added when you make transactions abroad or online with foreign merchants. Keep reading to learn about foreign transaction and currency conversion fees. And learn how to try to avoid them.
- Some credit card issuers charge fees for credit card purchases made outside of the United States. These surcharges are called foreign transaction fees.
- Foreign transaction fees can vary depending on the credit card issuer and product. Fees typically range from 1% to 4% of the transaction price.
- Some credit card issuers offer products that don’t charge any foreign transaction fees.
- Card payment processors or ATM networks can charge currency conversion fees for converting a foreign purchase into U.S. dollars. These fees are different from foreign transaction fees.
Foreign transaction fees explained
If you plan to use a credit card while shopping abroad, it’s helpful to know if your card charges foreign transaction fees.
Say you buy a new camera while out shopping in Tokyo. If you pay with a credit card, debit card or prepaid card, it might cost more than what the price tag says.
When you use your card while traveling abroad, you may have to pay a foreign transaction fee for any of your transactions there. If your card charges one, it can also be tacked on to your online transactions with merchants based outside of the U.S.
Some cards—like Capital One’s U.S.-issued credit cards and 360 Checking account debit cards—don’t charge foreign transaction fees. But if your card does, the actual cost can vary, depending on which credit, debit or prepaid card you use. The fees may generally be in the area of 3% of your purchase, though. You should check your card’s terms and conditions to see what they are.
How much do foreign transaction fees cost?
The cost of foreign transaction fees—sometimes listed as foreign purchase transaction fees—can vary from one credit card to another.
Foreign transaction fees typically range from 1% to 4% of each transaction. So if someone has a card with a 4% foreign transaction fee, they could pay an additional $4 per every $100 they spend. If a traveler uses their card to make a large international purchase—or several smaller purchases—these fees could add up quickly.
If you use a credit card to shop outside of the U.S., understanding your card’s foreign transaction fees could help you estimate some of your travel costs. You can review the terms and conditions to learn how foreign transaction fees apply to your credit card.
What about currency conversion fees?
Currency conversion fees can be included in foreign transaction fees. But there’s a slight technical difference. With foreign transaction fees, the issuer of the credit, debit or prepaid card you use may charge a fee for purchases made abroad or online from foreign merchants.
A currency conversion fee might be charged by the credit card or debit card payment network or ATM network for converting one currency to another. While Capital One doesn’t charge a currency conversion fee, other issuers might. If you’re charged a currency conversion fee, you might find that it’s 1% of the purchase with both fees combined and referred to as the foreign transaction fee.
Dynamic currency conversion fee example
Remember that great new camera you bought in Tokyo? If it cost 345,199 yen, how much is that in U.S. dollars? Not many people can do that math in real time.
That’s why foreign merchants will sometimes offer to perform a dynamic currency conversion (DCC). This optional service converts the foreign price to your home currency, giving you a better idea of what cost to expect.
But merchants aren’t usually providing this service for free. A DCC could cost you more, but the good news is you’re not required to use and pay for it. It’s helpful to talk to your card issuer and research your intended travel destinations prior to visiting.
If I pay a DCC fee, do I still pay a foreign transaction fee?
If you request a DCC, you’ll likely be paying that fee on top of your foreign transaction fee if your card has one.
DCC fees can cause your travel or online shopping expenses to increase. However, merchants typically aren’t allowed to perform a DCC without cardholder consent, so you can decide whether or not you’d like to pay for it.
Additionally, you may want to look for other ways to determine the price in your home currency, like currency conversion apps you can download onto your phone.
Do all credit cards have foreign transaction fees?
Not all card issuers charge foreign transaction fees. Capital One’s U.S.-issued credit cards, for example, don’t charge fees for foreign currency transactions.
That being said, foreign transaction fees can vary by card issuer and product. Other types of cards—like debit cards or prepaid travel cards—could also charge these fees. That’s why it’s a good idea to review your card’s specific terms and conditions.
How to avoid foreign transaction fees
Don’t let foreign transaction fees rain on your travel parade. There are several options to explore when it comes to avoiding these types of fees.
Use travel credit cards
Some travel rewards credit cards are designed with international travel in mind. They may have additional benefits too. For example, Capital One’s travel and miles rewards credit cards allow you to earn unlimited miles per dollar on every purchase you make.
Be sure to read your terms and conditions to check whether your card charges foreign transaction fees, though.
Consider a debit card without foreign fees
Using your debit card to withdraw cash while abroad could be a way to avoid foreign transaction fees, if your card doesn’t charge them.
But you might be charged international ATM withdrawal fees with some types of accounts. For example, Capital One doesn’t charge any additional international ATM withdrawal fees when you use 360 Checking and MONEY products abroad. But you could be charged a fee by the ATM operator. And there may be fees for non-360 products—like Total Control Checking, Essential Checking and other products—when you use an ATM outside of the U.S. and its territories.
According to the Consumer Financial Protection Bureau, some banks don’t charge their customers ATM withdrawal fees or debit card foreign transaction fees. But they might charge you if you’re not a customer—and that could be in addition to a fee charged by the operator of the ATM.
Before you leave the country, you might want to check whether your current card charges these fees. If so, you may want to find out if there’s a branch location or partner bank where you’re headed. You might be able to make free cash withdrawals from those locations.
Pay in the local currency
Having local currency on hand can be a convenient way to avoid foreign transaction fees, if you don’t mind carrying cash. But remember there could be other fees for using an ATM abroad. So consider exchanging currencies before you start traveling, especially if you’re unfamiliar with the country you’re traveling to.
Foreign transaction fees in a nutshell
Foreign transaction fees don’t have to put a dent in your travel plans. These fees can add up quickly, but there are some steps you could take to possibly avoid them. Using local currency is one option. You could also consider applying for a credit card that doesn’t charge fees for foreign transactions.
Some cards—like Capital One’s travel and miles rewards credit cards—don’t charge foreign transaction fees and offer additional travel benefits.
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.
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