What Are Foreign Transaction and Currency Conversion Fees?
Prevent excessive travel costs by understanding what foreign transaction fees are and how to avoid them
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.
What Are 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 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 can check your card’s terms and conditions to see what fees there are.
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.
You may see both fees combined and referred to as the foreign transaction fee.
What Are Dynamic Currency Conversion Fees?
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.
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 it 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 price in your home currency, like currency conversion apps you can download onto your phone.
How Can I 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 and don’t charge foreign transaction fees. 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 withdrawal ATM 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.
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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.
The information contained herein is shared for educational purposes only, and it does not provide a comprehensive list of all financial operations considerations or best practices.