Understanding & Avoiding Foreign Transaction Fees on Credit Cards

When you take your credit card on an international trip—or simply use it to buy something from an online merchant based overseas—you could pay a foreign transaction fee of 3 percent or more. If you take a vacation and spend $5,000 abroad with a card that has a 3 percent fee, you’ll pay $150 in foreign transaction fees.

What is a foreign transaction fee?

Although credit cards may provide a better currency exchange rate than a money-changing shop in a tourist neighborhood, your U.S. credit card may also change a foreign transaction fee, also known as a FX fee. Foreign transaction fees are different than the exchange rate.

These foreign transaction fees, often as much as 3 or 4 percent of the purchase in U.S. dollars, can add up quickly.

The thing to watch out for is that every card is different. Even two credit cards from the same bank may charge different foreign transaction fees.

Even two Chase credit cards, for example. The Chase Sapphire Preferred® Card has no foreign currency transaction fees and is an excellent choice for international travel. But a different card that you use all the time in the United States might not want to take it on your next international vacation because it charges you for foreign transactions.

With that fee, as of September 2019, a €100 restaurant tab in Barcelona will cost you about $111.50 plus a foreign currency transaction fee of at least $3.45.

How to avoid paying a foreign transaction fee

To avoid paying forieng transaction fees, you have a couple of options: Use cash or bring a credit card that does not charge foreign transaction fees.

Although you can typically get a good exchange rate by using your debit card at foreign ATMs, it’s never safe to carry a lot of cash while you travel. And you definitely want to avoid using touristy money-changing shops whenever possible.

Fortunately, there are many good travel rewards cards don’t charge a foreign transaction fee, making them the best choices for international travel. Many come with other perks that will be appealing for your international trip—such as global concierge lines or rewards programs that can help you reach your next trip faster.

Read more:

• The Best Credit Cards For International Travel