Kudos has partnered with CardRatings and Red Ventures for our coverage of credit card products. Kudos, CardRatings, and Red Ventures may receive a commission from card issuers. Kudos may receive commission from card issuers. Some of the card offers that appear on Kudos are from advertisers and may impact how and where card products appear on the site. Kudos tries to include as many card companies and offers as we are aware of, including offers from issuers that don't pay us, but we may not cover all card companies or all available card offers. You don't have to use our links, but we're grateful when you do!
Understanding Foreign Transaction Fees: A Complete Guide
Picture this: You're reviewing your credit card statement after an amazing vacation in Paris, and alongside your croissant purchases and museum tickets, you notice mysterious charges labeled "foreign transaction fee." If this sounds familiar, you're not alone. Let's dive into everything you need to know about these fees and how to avoid them.
What Are Foreign Transaction Fees?
Foreign transaction fees, also known as international transaction fees, are charges imposed by credit card issuers and payment networks when you make purchases abroad or through foreign merchants. These fees typically range from 1% to 3% of each transaction amount and consist of two components:
- A payment network fee (usually 1% from Visa or Mastercard)
- An issuing bank fee (typically an additional 1-2%)
For example, if you spend $1,000 on your European vacation using a card with a 3% foreign transaction fee, you'll pay an extra $30 just in fees.
How Foreign Transaction Fees Work
When you make a purchase abroad, your transaction goes through several stages of currency conversion and processing. Your credit card's payment network (like Visa or Mastercard) first converts the purchase from the local currency to U.S. dollars using the wholesale currency exchange rate. Then, both the payment network and your card issuer may add their respective fees for handling this international transaction.
American Express handles things slightly differently. Since they operate their own payment network, they typically charge a flat 2.7% foreign transaction fee on cards that aren't fee-free.
Ways to Avoid Foreign Transaction Fees
Choose the Right Credit Card
Many credit card issuers now offer cards with no foreign transaction fees, particularly among travel rewards cards. Some popular options include:
- Chase Sapphire Preferred® Card
- Wells Fargo Autograph℠ Card
- Capital One VentureOne Rewards Credit Card (rates & fees)
- Delta SkyMiles® Blue American Express Card
- Bank of America® Travel Rewards Credit Card
Smart ATM Strategy
When it comes to accessing cash abroad, consider these tips:
- Use banks with foreign ATM partnerships
- Look into accounts like Charles Schwab Checking or Capital One 360, which reimburse ATM fees
- Avoid airport currency exchange kiosks, which often offer unfavorable exchange rates
- Always choose to be charged in the local currency to avoid dynamic currency conversion (DCC) fees
Understanding Dynamic Currency Conversion
When making purchases abroad, merchants might offer to convert the charge to U.S. dollars before processing – this is called dynamic currency conversion (DCC). While it might seem helpful, DCC often results in poor exchange rates and additional fees. Always opt to pay in the local currency and let your card's payment network handle the conversion.
Smart Banking Tips for International Travel
Before You Travel
- Set up travel notifications with your card issuer
- Research your bank's foreign ATM partnerships
- Consider opening a no-foreign-transaction-fee credit card
- Download currency conversion apps for quick reference
During Your Trip
- Use credit cards for major purchases (better fraud protection)
- Carry some local cash for small transactions
- Avoid out-of-network ATM fees when possible
- Always decline dynamic currency conversion
Consider Using Kudos
While planning your international spending strategy, consider downloading Kudos, a free AI-powered browser extension that helps maximize your credit card rewards. Kudos works with over 15,000 stores and can help you:
- Choose the best credit card for each purchase
- Multiply your rewards up to 5X during Flash Boost events
- Get personalized credit card recommendations
- Track and optimize your rewards earning
Currently, Kudos is offering $20 back after your first eligible purchase — just sign up for free with code "GET20" and make a purchase at a Boost merchant.
Expert Takeaway
Foreign transaction fees are becoming increasingly avoidable with today's modern banking options. By choosing the right combination of credit cards and banking products, you can eliminate these fees entirely while enjoying better exchange rates and stronger fraud protection during your international travels.
Foreign Transaction Fees FAQ
How do I know if my card charges foreign transaction fees?
Check your card's terms and conditions under "transaction fees" or call your card issuer directly.
Do all credit cards charge foreign transaction fees?
No, many credit cards, especially travel rewards cards, have eliminated foreign transaction fees entirely.
What's the typical foreign transaction fee percentage?
Most cards charge between 1% and 3% of each foreign transaction amount.
Are foreign transaction fees the same as currency conversion fees?
While related, they're different. Currency conversion fees specifically relate to exchanging one currency for another, while foreign transaction fees apply to any foreign purchase, even in U.S. dollars.
Do debit cards charge foreign transaction fees?
Yes, many debit cards charge foreign transaction fees, often at higher rates than credit cards.
Can I avoid foreign transaction fees when shopping online from foreign merchants?
Yes, by using a credit card with no foreign transaction fees, you can avoid these charges even when shopping from overseas vendors.
Supercharge Your Credit Cards
Experience smarter spending with Kudos and unlock more from your credit cards. Earn $20.00 when you sign up for Kudos with "GET20" and make an eligible Kudos Boost purchase.
Editorial Disclosure: Opinions expressed here are those of Kudos alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
