{"id":87477,"date":"2023-01-22T21:38:04","date_gmt":"2023-01-22T21:38:04","guid":{"rendered":"https:\/\/businessyield.com\/?p=87477"},"modified":"2023-01-22T21:38:07","modified_gmt":"2023-01-22T21:38:07","slug":"foreign-transaction-fees","status":"publish","type":"post","link":"https:\/\/businessyield.com\/travels\/foreign-transaction-fees\/","title":{"rendered":"Foreign Transaction Fees: How To Avoid It","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"

Are you planning a trip abroad and wondering what the best way is to manage your finances while you\u2019re away? One of the things you should be aware of is foreign transaction fees. In this blog post, we\u2019ll go over everything you need to know about foreign transaction fees and how to avoid them.<\/p>

What is a Foreign Transaction Fee?<\/span><\/h2>

A foreign transaction fee is a fee charged by banks and credit card companies when you make a purchase in a foreign currency. The fee is usually a percentage of the purchase amount and is charged in addition to any other fees associated with the purchase.<\/p>

When you make a purchase in a foreign currency, the credit card issuer or bank will convert the currency into US dollars using an exchange rate. The exchange rate used is usually different than the rate available on the open market, and the difference is the foreign transaction fee.<\/p>

For example, if you purchase an item in a foreign currency and the exchange rate used by the credit card issuer is 1 USD = 1.2 EUR, and the open market rate is 1 USD = 1.25 EUR, then the difference would be the foreign transaction fee.<\/p>

In addition to the foreign transaction fee, there may also be other fees associated with the purchase such as currency conversion fees, service fees, and foreign ATM fees.<\/p>

The foreign transaction fee is divided into two parts:<\/p>

#1. Network fee (or currency conversion fee): <\/h3>

The credit card network charges this portion of the FX fee (Visa or Mastercard, for example). Both Visa and Mastercard levy a 1% fee. This fee is applied to all transactions, regardless of credit card type.<\/p>

#2. Bank fee issuance: <\/h3>

Depending on the credit card you use \u2014 Citibank, Chase, or Barclays, for example \u2014 some issuers charge a fee on top of the network fee, usually approximately 2%. Other issuers do not add their own and will even absorb the network fee, so you will not have to pay anything.<\/p>

Despite the fact that the fee is divided into two portions, foreign transaction fees are normally levied as a single charge to your credit card account per purchase. Card companies decide whether and how to charge these fees.<\/p>

How Do I Know if I Have Foreign Transaction Fees?<\/span><\/h2>

The best way to know if you have foreign transaction fees is to check your credit card statement or bank account for any charges labeled \u201cforeign transaction fee\u201d or \u201cinternational transaction fee.\u201d These fees are usually charged as a percentage of the purchase amount, so if you see a small fee added to your purchase total, it\u2019s likely a foreign transaction fee.<\/p>

It\u2019s also a good idea to check the terms and conditions of your credit card or bank account, as some cards and accounts may have foreign transaction fees without explicitly stating them.<\/p>

What are the Different Types of Foreign Transaction Fees?<\/span><\/h2>

There are two types of foreign transaction fees: merchant fees and currency conversion fees.<\/p>

Merchant fees are fees charged by the merchant for processing a foreign transaction. These fees are usually a percentage of the purchase amount and vary from merchant to merchant.<\/p>

Currency conversion fees are fees charged by the credit card issuer or bank for converting foreign currency into US dollars. These fees are usually a percentage of the purchase amount and are in addition to any other fees associated with the purchase.<\/p>

Foreign Transaction Fees By Credit Card Issuer<\/h2>

Foreign transaction costs vary depending on the card provider. This rate can even differ for different card products issued by the same company. The table below shows the typical FX fee by the issuer, as well as a selection of cards issued by that bank that do not charge FX fees. Every major bank has at least one card that does not charge foreign transaction fees.<\/p>

Issuer<\/th>Typical FX Fee<\/th>No-Foreign-Transaction-Fee Credit Cards (samples)<\/th><\/tr><\/thead>
American Express<\/td>2.70%<\/td>The Platinum Card\u00ae<\/sup> from American Express 
Delta SkyMiles\u00ae<\/sup> Reserve American Express Card
Delta SkyMiles\u00ae<\/sup> Platinum American Express Card 
Hilton Honors Aspire Card from American Express
Hilton Honors American Express Surpass\u00ae Card
Marriott Bonvoy Brilliant\u00ae<\/sup> American Express\u00ae<\/sup> Card <\/td><\/tr>
Bank of America<\/td>3%<\/td>Bank of America\u00ae<\/sup> Travel Rewards credit card
Bank of America\u00ae<\/sup> Premium Rewards\u00ae<\/sup> credit card
Alaska Airlines Visa\u00ae<\/sup> credit card<\/td><\/tr>
Barclays<\/td>3%<\/td>Hawaiian Airlines\u00ae Business MasterCard\u00ae
AAdvantage\u00ae Aviator\u00ae Red World Elite Mastercard\u00ae
AAdvantage\u00ae Aviator\u2122 Silver World Elite Mastercard\u00ae
JetBlue Business Card<\/td><\/tr>
Capital One<\/td>0%<\/td>All Cards<\/td><\/tr>
Chase<\/td>3%<\/td>Chase Sapphire Reserve\u00ae<\/sup> Card
Chase Sapphire Preferred\u00ae<\/sup> Card
United\u2120 Explorer Card
United Club\u2120 Infinite Card
British Airways Visa Signature\u00ae Card
Southwest Rapid Rewards\u00ae<\/sup> 
Premier Credit Card
IHG\u00ae<\/sup> Rewards Premier Credit Card
World of Hyatt Credit Card
Marriott Bonvoy Boundless\u00ae<\/sup> Credit Card<\/td><\/tr>
Citibank<\/td>3%<\/td>Citi Premier\u00ae<\/sup> Card
Citi Prestige\u00ae Credit Card
Citi\u00ae<\/sup> \/ AAdvantage\u00ae<\/sup> 
Executive World Elite Mastercard\u00ae<\/sup>
Citi\u00ae<\/sup> \/ AAdvantage\u00ae<\/sup> 
Platinum Select\u00ae<\/sup> World Elite Mastercard\u00ae<\/sup>
Expedia\u00ae+ Voyager Card from Citi
Costco Anywhere Visa\u00ae<\/sup> Card by Citi
CitiBusiness\u00ae\/ AAdvantage\u00ae Platinum Select\u00ae Mastercard\u00ae<\/td><\/tr>
US Bank<\/td>Up to 3%<\/td>U.S. Bank Altitude Reserve<\/td><\/tr><\/tbody><\/table><\/figure>

How To Avoid Foreign Transaction Fees<\/h2>

There are several alternatives available to assist you to avoid foreign transaction costs when traveling abroad. Many banks provide credit cards with no foreign transaction costs, while a few of institutions provide checking accounts with no foreign transaction fees for debit card cash withdrawals overseas.<\/p>

New debit or credit card applications can take up to a week to be accepted, and waiting for a new card to arrive in the mail can take up to two weeks, so you should think about these choices well in advance of your next large trip.<\/p>

#1. Apply for a Credit Card That Doesn’t Charge Foreign Transaction Fees<\/h3>

Many credit cards allow cardholders to swipe without paying a foreign transaction fee. These cards provide the most convenient and secure method of making international purchases.<\/p>

Credit cards that do not charge foreign transaction fees are handy both overseas and at home while buying on an international website. Many cards even include incentives that can be used to offset the cost of future trips or regular purchases.<\/p>

Perhaps the most significant benefit of using a credit card with no foreign transaction fees while traveling is that, even if credit card information is copied or stolen, it is quite simple to report fraud and rapidly recover stolen cash from a credit card issuer.<\/p>

The Chase Sapphire Preferred\u00ae Card is one of the most popular travel rewards cards. The Sapphire Preferred has no foreign transaction fees and earns 5 points for every dollar spent on travel purchased through Chase Ultimate Rewards\u00ae, 3 points for every dollar spent on dining, select streaming services, and online grocery purchases (excluding Walmart, Target, and wholesale clubs), 2 points for every dollar spent on all other travel purchases, and 1 point for every dollar spent on all other purchases. It has an annual fee of $95. This card’s benefits can be redeemed for flights, restaurants, hotels, and other items.<\/p>

#2. Get a Foreign Transaction Fee-Free Checking Account or Debit Card<\/h3>

A debit card with no overseas fees combined with a matching credit card is an excellent choice for a frequent traveler. A debit card that does not impose foreign transaction fees is handy even on its own for making everyday transactions and withdrawing money from ATMs. Due to high cash advance costs, travelers should never use a credit card to withdraw cash from an ATM.<\/p>

The Charles Schwab High Yield Investor Checking account is a popular choice for travelers. Schwab debit cardholders pay no foreign transaction costs and receive monthly ATM fee reimbursements.<\/p>

Although using a debit card is handy, it provides less protection against fraud than credit cards. When debit card information is stolen, it can take much longer to collect stolen monies from the issuing bank, and some account holders’ luck may run out completely. This can offer considerable concerns when overseas for people traveling on a budget or with low available funds. Always report fraud immediately and take all processes required by the bank to receive monies as soon as possible.<\/p>

#3. Use International ATMs Only After Paying Checking Fees<\/h3>

Regardless of whether they have a credit or debit card, travelers should double-check fees before using an international ATM. Fees to consider include overseas ATM fees, currency conversion fees, and fees charged by the home bank. These fees can be avoided by selecting a bank account that does not impose fees and reimburses out-of-network ATM fees, as well as withdrawing local currency from ATMs. Account holders can also inquire with their home bank about the availability of partner branches or in-network ATMs in the destination country or country.<\/p>

Travelers who do not have a fee-reimbursement account may wish to consider making fewer ATM trips and withdrawing more cash each time to reduce expenses. Of course, carrying more cash increases the risk.<\/p>

#4. Before Leaving the U.S., exchange cash.<\/h3>

Paying for a vacation in cash is one approach to avoid ATM or transaction costs. Before a big journey, travelers can exchange US dollars for most major currencies at a bank, credit union, or currency exchange store. This may be a smart idea if you know exactly how much you’ll spend on food and souvenirs. When compared to exchanging money at an airport upon arrival, banks and credit unions often have the lowest exchange rates or costs. We recommend exchanging currencies as far away from an airport as possible\u2014rates tend to worsen as you approach closer to a big transit hub.<\/p>

Keep in mind the dangers of carrying significant amounts of cash while traveling. There is a bigger possibility of losing or having the money taken. When picking this choice, exercise extra caution and ensure that you have a backup option, such as a backup credit card, so that you don’t find yourself without a way to buy meals or transportation tickets. When credit cards are taken, fraud protection advantages may restrict a cardholder’s liability to zero dollars, but when cash is stolen, there is sometimes no recourse.<\/p>

Which Banks Have No Foreign Transaction Fee?<\/span><\/h2>

There are a number of banks and credit card companies that offer cards with no foreign transaction fees. Some of the most popular banks and credit card companies that offer cards with no foreign transaction fee are:<\/p>