If you plan to use your credit card while traveling abroad or shopping online from merchants in a foreign country, be mindful of foreign transaction fees or currency conversion charges which may accumulate quickly.
Credit card issuers are required to clearly list these fees on your monthly statement as line items – you can find this under “Rates and Fees” (or Pricing and Terms) section of your card details.
What is a foreign transaction fee?
Foreign transaction fees refer to surcharges that credit cards levy for purchases made outside the United States. Usually, these costs cover the conversion from local currency into USD for processing the transaction – an industry practice designed to mitigate any added risk when dealing with banks located abroad.
Credit card issuers are required to clearly display foreign transaction fees on your billing statement so you can easily understand what these charges entail. Furthermore, payment processing networks such as Visa and MasterCard often tack on currency conversion fees that add another charge; all this information may be combined into one overall total amount charged by your issuer.
These charges can add up quickly if you travel frequently or shop online from abroad. To prevent incurring these additional expenses, look into finding a top travel rewards card or one with no foreign transaction fees.
How do I know if I’ll be charged a foreign transaction fee?
No matter whether you are traveling internationally or shopping from retailers based in another country, your credit card may incur a foreign transaction fee from its issuer to cover currency conversion and related costs associated with international transactions. These fees typically amount to approximately 3% of your purchase amount but this may differ depending on which card issuer applies them.
To avoid foreign transaction fees, look for a credit card that doesn’t charge them. To confirm this is the case, visit its terms and conditions webpage to make sure no such fees exist.
An effective way to lower spending is with a credit card with no foreign transaction fees and low fees – such as 1% or 2% – from card issuers. But you should be wary with such cards, as they tend to be more susceptible to fraud and other issues; NerdWallet suggests using these types of cards only when necessary for specific purchases.
How much do I pay for a foreign transaction fee?
Traveling overseas or shopping online from international merchants? When using your credit card abroad, foreign transaction fees could apply. These charges could total 3% of your purchase amount and come from two sources – your card issuer (such as Citi, Chase or American Express), and payment processing networks like Visa Mastercard Discover etc. You should look out for them under “Pricing and Terms” or “Rates and Fees” sections of your card’s terms of agreement.
Understanding fees associated with travel rewards cards from Capital One and Discover can be crucial when budgeting for international trips and online purchases. But you don’t have to incur these extra charges by choosing one of their cards without incurring them – such as one of our top travel rewards cards!
Can I avoid a foreign transaction fee?
While credit card issuers have made strides towards eliminating foreign transaction fees, some cards still charge these charges. To reduce them, either shop only with US sellers online or use a card that waives them, such as Chase Sapphire Preferred and Capital One Venture Rewards cards that provide this feature.
Other ways of avoiding these charges include paying with cash, which doesn’t incur foreign transaction fees; shopping only with card-accepting sellers who charge in U.S. dollars; or by avoiding dynamic currency conversion. You could also consider getting a card that doesn’t levy these fees upfront (this will depend on its issuer – Capital One and Discover don’t charge these fees on their cards, for example); this way you’ll keep spending costs at their minimum possible amount.
