A Guide to Foreign Transaction Fees

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Airline tickets, checked bag fees, hotel bookings, outrageous rental car prices — these are the vacation costs you’ve probably budgeted for. But when you travel abroad, you may also need to plan for foreign transaction fees every time you swipe your card.

Some debit and credit card issuers offer cards without any foreign transaction fees, but if you don’t have one of these in your wallet, you could spend upwards of 4% of the total transaction price each time you buy a cup of gelato, purchase a ticket to a museum or swipe your card to use the train system.

Not keen on throwing away your vacation budget on fees that add no value to your travel experience? We’ll cover how foreign transaction fees work, how much they cost and, most importantly, how to avoid foreign transaction fees altogether.

What Is a Foreign Transaction Fee?

A foreign transaction fee is a surcharge assessed by a bank or credit card issuer when you make a purchase in a country outside of the United States. Not every bank and credit card issuer charges a foreign transaction fee, so it’s a good idea to research such fees before opening an account or credit card.

While we typically think about foreign transaction fees being assessed when we’re traveling abroad, you may also pay a foreign transaction fee when shopping online with an international vendor. In fact, any time your purchase is routed through a foreign bank, a foreign transaction fee may apply.

How Much Do Foreign Transaction Fees Cost?

Foreign transaction fees generally cost between 1% and 4% of the transaction. For example, if you charge $100 on your credit card in a foreign country, you’ll pay the $100 that is owed to the merchant, but you might also pay $1 to $4 extra in foreign transaction fees, depending on the rate assessed by your bank or credit card issuer.

Not sure how your credit or debit card issuer calculates foreign transaction fees? Head to the website or pull out your paperwork from when you first opened the account. International transaction fees are typically buried in the fine print of the account’s terms and conditions. Online, you might find the surcharge details under the bank’s “Rates and Fees” section.

Though foreign transaction fees don’t change as frequently as a bank account’s APY or credit card’s APR, financial institutions and credit card issuers do reserve the right to change their foreign transaction fee structure. It’s a good idea to check card details ahead of any international trip so you know what to expect — and see if anything has changed since your last time abroad.

You usually won’t be spending US dollars when swiping your debit card or credit card in another country. Instead, prices may be in euros, pesos, yen or another denomination.

When you use your credit card in another country, the issuer will automatically convert the foreign currency amount to U.S. dollars and then charge the fee percentage based on that amount.

Foreign Transaction Fees vs. Currency Conversion Fees

While your credit card or bank may advertise its foreign transaction fee as a single percentage, it’s actually composed of two separate fees:

  • Currency conversion fee: Also called a network fee, the currency conversion fee is the charge assessed by the credit card network, such as Visa or Mastercard. Both Visa and Mastercard currently charge a 1% fee for every foreign transaction. As the name implies, this is a fee for converting your money (or credit) from US dollars to the currency of the country you’re in.
  • Bank fee: Banks like Citi, Capital One and Chase issue credit cards, and they can tack on their own fees separate from the network fee. These are usually 2% to 3% of all foreign transactions.

Not every credit card issuer charges the bank fee—instead, they may only charge you the currency conversion fee that the network is charging them. Other card issuers don’t charge you any fee at all; instead, they absorb the currency conversion fee and market their credit cards as having no foreign transaction fees. Typically, travel credit cards that don’t charge foreign transaction fees are reserved for borrowers with good or excellent credit.

When traveling abroad, some merchants may offer to convert the currency to US dollars for you before you pay. This is called dynamic currency conversion — and it’s expensive. While this option lets you see how much money you’re actually spending (otherwise, you’ll have to wait for your debit or credit card statement), dynamic currency conversion fees are exorbitant, sometimes up to 12%.

Our take? Never say yes to dynamic currency conversion! Even if you’ve only got credit and debit cards that charge a foreign transaction fee, it’ll still be cheaper than what the merchant will charge you.

Pro Tip

Download an exchange rate app that helps you calculate what something in a foreign currency will cost in U.S. dollars. That way there are no currency conversion fee surprises.

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How Can I Avoid Foreign Transaction Fees?

If you don’t want to incur foreign transaction fees when spending money abroad, you have a few options. Consumers who regularly travel internationally should consider opening a credit card without foreign purchase transaction fees, but other options include avoiding ATMs and relying on cash exchanged before you even start your vacation.

Get a Checking Account, Debit Card or Credit Card with No Foreign Transaction Fees

The simplest way to avoid foreign transaction fees? Open a credit card that doesn’t charge foreign transaction fees. Some of our favorite credit cards without a foreign transaction fee include the Capital One Quicksilver Cash Rewards Credit Card, Chase Sapphire Preferred Card, Bank of America Travel Rewards credit card, Discover it Miles, and Citi Premier Card.

Need help narrowing it down? Check out our ranking of the best credit cards with no foreign transaction fees to figure out which offers the right blend of perks, rewards and fees for your travel needs.

Because credit card issuers typically want to see strong credit scores and/or charge annual fees for their credit cards with no foreign transaction fees, such cards may not be the right option for you. If you’ll be traveling abroad regularly and want to use a card without racking up foreign transaction fees, look for checking accounts that come with debit cards that you’re free to use internationally without a surcharge.

Pro Tip

Capital One, Chime and Charles Scwab are three financial institutions that do not charge foreign transaction fees. Charles Schwab even offers unlimited ATM fee rebates globally.

Don’t Use International ATMs Without Checking Fees First

Even if you have a debit card or credit card that doesn’t charge foreign transaction fees, you can still get slapped with some unexpected fees when banking abroad—specifically at the ATM. If you withdraw money from an international ATM, you might have to pay:

  • ATM fees: ATMs charge fees for their usage. Here in the US, you likely have specific ATMs that you can use without incurring a fee; these ATMs are called “in-network ATMs.” Most checking accounts offer a US-based network of ATMs, and some of the best checking accounts offer ATM fee reimbursement when you use an ATM out of network. But most limit that to the US; only a handful of checking accounts offer unlimited ATM fee reimbursement worldwide.
  • Currency conversion fees: If you withdraw money from a foreign ATM, you’ll likely want that money in the currency of the country you’re visiting. But the money sitting in your bank account back home is in US dollars. Just as credit card networks charge a currency conversion fee every time you swipe your card abroad, foreign ATMs charge a fee for changing your money over from USD.

These ATM fees may be unavoidable, so it’s a good idea to ask your bank for information about international ATMs — before you board your flight. Customer service might be able to point you to certain partner banks or ATMs where fees will be lower.

Exchange Cash Before Leaving the United States

If you don’t have a credit card or debit card with no foreign transaction fees, your best bet is paying with cash in the foreign currency. The problem? You’ll pay high exchange rates at airports, hotels and train stations — all the convenient places you’ll be during your trip.

Instead, plan ahead by visiting a local bank or credit union before your trip. Though you will still pay a fee, you can exchange your cash for foreign currency much more affordably here. If you run out of cash during your trip, visit a foreign bank for lower conversion fees. It might be a little out of your way (and a little frustrating) to find a brick-and-mortar bank in a foreign country, but if you can spare the time, you’ll save money at a bank compared to exchanging at a transit station or hotel.

Despite the currency conversion fees, ATMs are often a better deal than currency exchanges at airports, hotels and train stations.

Pro Tip

When traveling abroad, it’s a good idea to have multiple credit cards and cash for emergencies. Some businesses no longer accept cash post-COVID, but smaller mom-and-pops may only take cash.

Foreign Transaction Fees: What You Need to Know

A foreign transaction fee applies to purchases made with a debit or credit card in another country (or even when making online purchases from foreign merchants using your debit or credit card). A typical foreign transaction fee is between 1% and 4% of the credit card transaction, but many top travel credit cards waive foreign transaction fees entirely — usually as a compelling selling point to borrowers with good or excellent credit.

Before traveling out of the country, it’s a good idea to check if your debit or credit card issuer charges foreign transaction fees and devise a plan to avoid them if so. Opening a new credit card without fees for foreign transactions is the easiest solution, but if you can’t qualify for or don’t want a new card, it’s a good idea to carry lots of cash in the currency of the country you’re visiting — and exchange for that cash at a local bank before your trip.

Frequently Asked Questions (FAQs) About Foreign Transaction Fees

Here are the answers to the most common questions about foreign transactions fees.

Is a 3% Foreign Transaction Fee a Lot?

A 3% foreign transaction fee may not sound like much, but if you spend a lot of money while traveling internationally, it can add up quickly. That’s $3 for every $100 you spend or $30 for every $1,000 you spend. When you think about the costs of foreign travel — lodging, restaurants, transit and experiences — foreign transaction fees can become quite significant by the end of the trip.

Do All Credit Cards Have Foreign Transaction Fees?

Not all credit cards charge foreign transaction fees. Though Visa and Mastercard always charge a 1% network fee, many of the best travel credit cards absorb this fee on behalf of the consumer. To qualify for a credit card with no foreign transaction fees, you often need good to excellent credit. Some of these cards charge annual fees, so think about how much value you’ll get out of the card before applying.

How Are Foreign Transaction Fees Calculated?

To calculate foreign transaction fees, multiply the total purchase cost by the foreign transaction fee percentage. Note that you’ll first need to convert the purchase amount to USD; banks and credit unions calculate foreign transaction fees based on this converted U.S. dollar amount.

For example, if you purchase something for 20 euros and the current conversion rate is $0.97 for 1 euro, your 20-euro purchase is actually only $19.43 in US currency. Assuming a 3% foreign transaction fee, multiply the purchase ($19.43) by the fee (3%) to get a little over $0.58. That extra $0.58 will show up on your debit or credit card statement.

Does a Foreign Transaction Fee Count Toward Credit Card Rewards?

If you have a rewards credit card that earns you cash back as a percentage of how much you spend, it’s likely that foreign transaction fees are not included. That is, if you spend $100 and are charged a $3 foreign transaction fee, your rewards card that earns 1% cash back will pay out rewards on the $100 but not the $3 foreign transaction fee.

Contributor Timothy Moore is a writer and editor in Cincinnati who covers banks, loans, insurance, travel and automotive topics for The Penny Hoarder.