Foreign transaction fees are a hassle – here’s how to avoid them (2024)

When budgeting for international travel, you might look first for ways to save on airfare, lodging and other major expenses. However, you can also save by trimming smaller expenses, especially unwanted and unnecessary ones such as foreign transaction fees.

Depending on which payment method you use, these nuisance fees can get added to every purchase you make overseas, eating up funds you could enjoy elsewhere. If you choose the right payment method, you can avoid credit card foreign transaction fees entirely whether you’re traveling abroad or shopping internationally from home.

What are foreign transaction fees?

Foreign transaction fees are surcharges on transactions processed in a foreign currency or by a foreign bank. That means if your card is issued by a US bank, transactions processed outside the US or in a currency other than US dollars may be subject to foreign transaction fees.

You’ll typically see one charge on your account statement for each foreign transaction fee, but these fees are actually assessed in two parts: one by your bank or credit card issuer, and one by the payment network that settles the transaction (such as Visa, Mastercard, American Express or Discover).

Types of transactions subject to fees

In the internet age, you don’t have to travel abroad to incur foreign transaction fees. If your purchase is processed by a foreign bank or in a foreign currency, fees may apply even if you’re sitting at home. You may be charged credit card foreign transaction fees when:

• Purchasing goods while traveling abroad: When you travel outside the US, foreign transaction fees may be added to every item you purchase in person.
• Paying for services while traveling abroad: Similarly, foreign transaction fees may be added when you pay foreign vendors for services. That includes airfare, hotels, transit and tours.
• Making online purchases from foreign merchants: When you make a payment to a business outside the US, your transaction may be processed in another currency or by a foreign bank. This can include buying goods from other countries and booking hotels or vacation packages with foreign travel providers.

How much are foreign transaction fees?

Credit card foreign transaction fees are often 3% of the purchase amount — that’s what you’ll pay on popular cards such as the Chase Freedom Flex℠*The information for the Chase Freedom Flex℠ has been collected independently by CNN Underscored. The card details on this page have not been reviewed or provided by the card issuer. and the Wells Fargo Active Cash® Card. American Express cards are an exception, as Amex charges 2.7% on its personal and business credit cards with foreign transaction fees. No Capital One or Discover credit cards add a foreign transaction fee.

A 3% foreign transaction fee isn’t likely to break the bank — that’s an extra $30 tacked on to every $1,000 of purchases charged abroad. However, these fees add to your costs without providing any value in return. Fortunately, you can avoid foreign transaction fees with minimal effort.

How to avoid foreign transaction fees

The easiest way to avoid foreign transaction fees is to use a credit card that doesn’t charge them.

This advice is easy to follow, as the US market has numerous credit cards that don’t charge foreign transaction fees, including both personal and small business credit cards.

If your credit card charges foreign transaction fees, try to make online purchases through US domains rather than those based in other countries. Additionally, make sure your transaction is being processed in US dollars rather than a foreign currency.

Choosing credit cards with no foreign transaction fees

Most of the top travel credit cards waive foreign transaction fees, but you can also find cash back credit cards and debit cards that do the same. Choosing among them is a matter of deciding which card best meets your needs, and you shouldn’t prioritize this single feature heavily over others unless the majority of your purchases are made in a foreign currency.

Is it better to use credit or cash abroad?

Paying in cash is another way to avoid foreign transaction fees. You’ll want to secure cash before you head out to get the best exchange rates, and keep in mind that cash doesn’t come with the same protections as credit cards.

“You can usually get a better rate from your bank at home if you plan ahead, but it’s not always feasible or wise to carry all that cash,” said Ted Rossman, a senior industry analyst at Bankrate.

Carrying some cash is prudent while traveling abroad, but no foreign transaction fee credit cards allow you to avoid fees while also earning rewards and staying protected from unauthorized and fraudulent transactions.

Key considerations for international travelers

Calculate potential foreign transaction fees

You can calculate foreign transaction fees by multiplying your card’s fee by the purchase amount. For example, to calculate the cost of a 3% fee on a purchase of 1,274 pounds, multiply 1,274 by .03 for a total of 38.22 pounds. Similarly, a fee of 2.7% on a purchase of 743 Canadian dollars would be CA$20.06 (743 multiplied by .027).

This calculation tells you the fee in whatever currency the transaction is processed in. You can convert to US dollars before or after the fee calculation to see how much you’ll owe in dollars.

Avoid dynamic currency conversion

When settling a transaction abroad, you may be presented with the option to pay in US dollars instead of the local currency (a process known as dynamic currency conversion). You might find it appealing to see your costs expressed in familiar terms, and paying in US dollars might seem like a way to avoid foreign transaction fees, but in reality, it will likely cost you more. Dynamic currency conversion not only tends to provide a substandard exchange rate, but also remains subject to foreign transaction fees, since the charge is still processed abroad even though it’s presented in US dollars.

To avoid dynamic currency conversion fees when traveling internationally, choose to pay credit card transactions in the local currency rather than in US dollars. Some merchants will attempt to make this decision for you, so confirm which currency you’re transacting in before you pay.

Frequently asked questions

*The information for the following card(s) has been collected independently by CNN Underscored Money: Chase Freedom Flex℠*The information for the Chase Freedom Flex℠ has been collected independently by CNN Underscored. The card details on this page have not been reviewed or provided by the card issuer. . The card details on this page have not been reviewed or provided by the card issuer.