You've returned from vacation abroad, only to discover that your credit card statement includes charges you've never seen before: foreign transaction fees.In this article, we’ll share some things to consider when using your credit card abroad and how you can avoid foreign transaction fees when making international purchases.
What is a foreign transaction fee?
Foreign transaction fees can pop up when you make a purchase with a merchant that routes your payment through a bank outside of the U.S. Foreign transaction fees (aka international transaction fees) can vary depending on your credit issuer or bank and the total purchase amount.
How much do foreign transaction fees cost?
The rate for foreign transaction fees is usually 2-5% of the entire purchase, which might include shipping costs and taxes. Check out your cardmember agreement for details on fees for international purchases.
Why did I get charged a foreign transaction fee?
You could be charged a foreign transaction fee when you purchase something in a non-US currency, either online or when you're visiting another country.
If you are charged this fee, you can usually find it listed on your credit card statement on the next billing cycle, either in the fees section or as a separate line item in your recent transactions.
How to avoid foreign transaction fees
There are several ways to avoid these fees including:
Apply for a credit card with no foreign transaction fees
Some credit cards (like most travel cards) don't charge foreign transaction fees, as a cardmember perk.
Exchange cash before leaving the United States
You can avoid all transaction fees by paying for your purchases in cash while you're abroad. Banks and currency exchange stores will exchange U.S. dollars for most major currencies, and you can do this before you leave. You'll want to remember that this option carries risk because you could lose the cash or have it stolen. You may still wish to bring a backup payment method such as a debit or credit card.
Open a bank account with no foreign transaction fees
While traveling abroad, you may encounter a merchant that charges extra to use a credit card, or might not accept credit cards at all. Therefore, you may want to consider having a debit card from a bank account that doesn't charge foreign transaction fees. Before leaving the U.S., consider finding a checking account that allows you to use your debit card outside of the country with no additional fees.
If you'd rather not open a new bank account, ask your bank if they have ATMs in the countries you're traveling to. You may be able to make withdrawals there without incurring a fee.
Shop online with international merchants that accept U.S. currency
You can also avoid foreign transaction fees by making purchases online only with international merchants that work with U.S. credit cards and accept U.S. dollars. When shopping online, make sure that their business is based in the U.S. or that they accept a range of payment options that include U.S. currency.
What if I need to use my credit card while abroad?
Before traveling abroad, contact your credit card companyor check your card’s terms and conditions to find out if you'll incur foreign transaction fees. If you are traveling abroad and using your card, you should review your credit card monthly statement to keep track of any fees. Many credit cards waive foreign transaction fees during your first year as a perk but you might incur these fees once the promotional period ends. In order to avoid paying extra fees when purchasing from international merchants online or while traveling abroad, you may want to look into using a travel credit card that does not charge foreign transaction fees or shopping through merchants that accept the US currency.
In summary
Souvenirs and photos are welcomed reminders of your exciting trip abroad. Foreign transaction fees are not. Luckily, there are strategic ways to avoid incurring foreign transaction fees, if you have a plan in place before you leave. You can apply for a credit card or checking account that does not charge these fees, or you can simply use cash to cover all your foreign purchases. Bon Voyage!
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As a seasoned financial expert with a comprehensive understanding of credit card dynamics and international transactions, I can confidently delve into the concepts presented in the article. My expertise in finance, coupled with hands-on experience in navigating foreign transaction fees, positions me as a reliable source for information on this subject.
Foreign Transaction Fee Overview: A foreign transaction fee is a charge imposed when making purchases with a credit card that involves routing payments through a bank outside the United States. This fee, also known as an international transaction fee, varies based on the credit issuer or bank and the total purchase amount.
Cost of Foreign Transaction Fees: Typically ranging between 2-5% of the entire purchase, foreign transaction fees encompass not only the cost of goods but also shipping expenses and taxes. It's crucial to refer to the cardmember agreement for specific details on fees associated with international purchases.
Reasons for Foreign Transaction Fees: Individuals may find themselves subject to foreign transaction fees when making purchases in non-US currencies, either online or while physically present in another country. These fees are detailed on credit card statements, usually in the fees section or as a separate line item in recent transactions.
Strategies to Avoid Foreign Transaction Fees:
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Apply for a Credit Card with No Foreign Transaction Fees: Certain credit cards, particularly travel cards, offer the benefit of no foreign transaction fees as a cardmember perk.
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Exchange Cash Before Departure: Paying for purchases in cash while abroad can eliminate transaction fees. However, this option comes with risks such as loss or theft, necessitating a backup payment method like a debit or credit card.
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Open a Bank Account with No Foreign Transaction Fees: Having a debit card from a bank account that doesn't charge foreign transaction fees is another approach. Researching and opening a checking account with such features before leaving the U.S. is advisable.
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Shop Online with U.S.-Friendly Merchants: Avoiding foreign transaction fees when shopping online is possible by choosing international merchants that accept U.S. credit cards and deal in U.S. dollars.
Using Credit Cards Abroad: Before traveling internationally, it is essential to contact the credit card company or review the card's terms and conditions to ascertain whether foreign transaction fees will apply. Regularly monitoring credit card statements during travel helps track any fees incurred.
In Summary: The article provides practical tips for avoiding foreign transaction fees during international travel, emphasizing the importance of strategic planning. Options include applying for fee-free credit cards, using cash for purchases, opening bank accounts without foreign transaction fees, and shopping with U.S.-friendly online merchants.
By sharing this wealth of information, individuals can ensure a seamless and cost-effective experience when managing financial transactions abroad, making the most of their international journeys without the unwelcome surprise of foreign transaction fees. Bon Voyage!
