Foreign transaction fees: What you need to know
August 10, 2023 8 min read
Getting ready to travel abroad? There’s a lot to take care of before you leave. Plane tickets? Already bought. Travel insurance? Got it. 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 how you might be able to avoid them.
- A foreign transaction fee is a surcharge on credit card purchases made outside of the U.S. They might also apply to purchases made with debit and prepaid cards.
- Fees can vary, depending on the card issuer, card network and product but typically range from 1% to 3% of the transaction.
- Some credit card issuers offer cards that don’t charge any foreign transaction fees.
- Card payment processors or ATM networks can charge fees for converting foreign purchases into U.S. dollars. These currency conversion fees are different from foreign transaction fees.
What is a foreign transaction fee?
A foreign transaction fee is an additional charge added to credit, debit and prepaid card transactions made outside of the U.S. If you plan to use a credit, debit or prepaid 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, debit or prepaid card, it might cost more than what the price tag says.
When you use your card in a foreign country, 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.
The fee can be made up of smaller charges by the card network—like American Express®, Discover®, Visa® or Mastercard®—as well as the bank or credit card issuer.
Some cards—like Capital One’s U.S.-issued credit cards and debit cards—don’t charge foreign transaction fees. View important rates and disclosures. 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 1% to 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 or international transaction fees—can vary from one card to another.
Foreign transaction fees typically range from 1% to 3% of each transaction. So if someone has a card with a 3% foreign transaction fee, they could pay an additional $3 for 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, debit or prepaid 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 card.
Currency conversion fees vs. foreign transaction fees
Currency conversion fees can be included in foreign transaction fees, but there’s a slight technical difference. With foreign transaction fees, the card issuer charges a fee for purchases made abroad or online from foreign merchants. A currency conversion fee, meanwhile, is charged by the credit card or debit card payment network or ATM network for converting one currency to another.
Capital One doesn’t charge a currency conversion fee, but other issuers might. View important rates and disclosures. 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 costs 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 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 don’t usually provide 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 before visiting.
If I pay a DCC fee, will 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 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. View important rates and disclosures.
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 can I avoid paying 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, like rewards miles. For example, Capital One’s travel and miles rewards credit cards allow you to earn unlimited miles per dollar on every purchase you make and even more rewards for travel-related bookings.
While some travel rewards credit cards charge an annual fee, the perks can make it worthwhile. For instance, the Capital One Venture X card has an annual fee, but it doesn’t charge foreign transaction fees. View important rates and disclosures. And it also offers an early spend bonus, an anniversary bonus, an annual travel credit and more.
Consider a debit card without foreign transaction 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 fees with some types of bank 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 ATM operator.
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
Wondering about whether to use cash or a card when traveling? 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 a foreign ATM. Currency exchange kiosks may be available at the airport but might charge higher conversion rates than your bank or credit card.
So consider researching the exchange rate and exchanging currencies before you start traveling, especially if you’re unfamiliar with the country you’re traveling to.
How to calculate a foreign transaction fee
Generally, the foreign transaction fee is a percentage of the total purchase. So, you’ll need to find out the percentage a card charges and multiply that by your total purchase. For example, if you purchase a $100 item and the foreign transaction fee is 3%, you will pay an additional $3 on top of the cost of your item.
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—or using a debit or prepaid card—that doesn’t charge fees for foreign transactions.
If you’re a frequent traveler, you might consider Capital One’s Venture X card. It has no foreign transaction fees and comes with plenty of other elevated travel rewards designed to take you further. View important rates and disclosures.