Foreign transaction fees: Everything you need to know

Foreign Transaction Fees: Everything You Need to Know

Mention the words “foreign transaction fee” and most people will groan. That’s because if you’re an international traveler and use a credit or debit card to make purchases outside of your home country, chances are you’ll pay a foreign transaction fee for your purchases.

What is a Foreign Transaction Fee?

A foreign transaction fee is an extra fee charged by your card issuer when you make purchases while abroad. It’s typically a percentage of the total cost of that purchase, usually anywhere from 0% to 3% of the purchase cost.

Who Charges Foreign Transaction Fees?

Typically, the card issuing banks are the ones who charge foreign transaction fees. Banks and credit card issuers charge foreign transaction fees for foreign purchases and ATM transactions because these transactions often require more processing and added risk when transactions occur outside the issuer’s home country.

How to Avoid Foreign Transaction Fees

If you plan to travel abroad and don’t want to pay foreign transaction fees, here are a few tips you can use to sidestep them:

  • Choose the right credit card. Research credit cards that don’t charge foreign transaction fees and opt for one before you go abroad.
  • Use a debit card. Debit card transactions cost less to process than credit card transactions, so many banks and issuers don’t charge foreign transaction fees.
  • Pay with cash. Using cash in the foreign currency eliminates the risk of a foreign transaction fee being added to your purchase.

Bottom Line

Foreign transaction fees can add up quickly, so it’s important to do your research and know what to expect when you’re traveling abroad. By choosing the right credit card and understanding how foreign payment transactions work, you can minimize foreign transaction fees and make your travels more budget-friendly.