What is a foreign transaction fee?

Tourists taking pictures at the Royal Palace Madrid, unconcerned about foreign transaction feesImage: Tourists taking pictures at the Royal Palace Madrid, unconcerned about foreign transaction fees

In a Nutshell

A foreign transaction fee could add a few bucks to every purchase you make while you're abroad. Here's how to find out when you must pay foreign transaction fees and tips to help you avoid them.
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Foreign transaction fees can really ding your wallet, but there are ways for you to avoid them.

Our picks: Travel credit cards with no foreign transaction fees

A foreign transaction fee is what your credit card issuer — such as Chase or Bank of America — charges when a transaction you make with your card processes in a foreign currency or passes through a foreign bank. To process these foreign transactions, your card issuer charges you a percentage of the amount of this transaction, typically 3%. You’ll commonly see this fee listed on your card statement as a separate charge.

This means that if you spend $100 at a restaurant in another country, you might pay an extra $3 as a foreign transaction fee. It may not seem like much, but consider how that can add up over a long European trek. And you don’t have to be using your card abroad to be charged a foreign transaction fee: You may also be charged the fee if you’re at home and shopping online from a foreign retailer.

There’s good news: Not all credit cards charge foreign transaction fees. But even if your card doesn’t charge this fee, there are still other surcharges you should look for while you’re on that dream vacation.

When will I be charged a foreign transaction fee?

Not all credit cards charge a foreign transaction fee, but many do. To find out if your card does, check the “fees” section of the terms and conditions for your card.


There are typically two parts to a foreign transaction fee

A foreign transaction fee is typically made of two parts. First, there’s a currency conversion fee, which is charged by the card network, such as Visa or Mastercard. Both charge 1%. There’s also an extra fee added by the card issuer. This is typically about 1% or 2%, although it varies based on the issuer and the card. These two fees are generally combined into a single foreign transaction fee on your statement as one total charge.

If your card does have this fee, you’ll see a little extra added each time you swipe your card outside the U.S. But here’s a potential surprise: You can pick up these fees stateside, too.

You could get charged in either of these situations:

  • You buy something online from a company that’s based outside the U.S.
  • You make a purchase in which the transaction is routed through a non-U.S. bank.

These charges can be difficult to prevent. You can check the “about” section of a retailer’s website to see if it’s based outside the U.S., or check whether the currency symbol is in U.S. dollars when you go to pay.

However, you could pay in dollars and not know the transaction went through a non-U.S. bank until you see the foreign transaction fee listed on your statement. That’s why it’s always best to check your statement before paying each month. If you see a foreign transaction fee, you may want to call your credit card issuer to see if the charge is legit. If it is, you’ll have to pay the fee — but you’ll know to avoid that online retailer in the future if you don’t want to see extra charges on your statement.

And remember, you’ll only pay a foreign transaction fee if your card’s terms and conditions say you’ll pay one. Some card issuers, like Discover and Capital One, have started nixing the fee altogether. Read on to learn about exchange rates, currency conversion fees and how to decide when simply carrying cash may be easier.

What other charges do I need to worry about?

In your travels, you’ve probably swapped U.S. dollars for local cash. You may not realize you’re making a similar exchange every time you swipe your credit card abroad. That’s because your card issuer uses its own currency conversion rate for your transactions.

Before your trip, ask your card issuer what rate it’s using — these rates can vary. Then compare it with the market rate using a currency comparison website, such as x-rates.com.

Here’s a hint, though: Your credit card may give you a better rate than a bank or currency exchange airport kiosk. That is something to consider before you get to your destination.

How to avoid extra fees abroad

The easiest way to avoid extra credit card fees when making purchases outside the U.S. is to get a card that doesn’t charge foreign transaction fees. Here are a few more strategies you can use to help reduce fees:

Choose the local currency

If you’ve traveled before, this situation may sound familiar.

Let’s say you’re eyeing a souvenir and you decide to charge it to your card. The merchant will ask whether you want to pay in U.S. dollars or the local currency. It may sound convenient to choose the currency you’re familiar with — if you’re American, you’ll probably have an idea of how much the item would cost at home, in U.S. dollars.

But it might be a good idea to choose the local currency. Here’s why.

If you choose to pay in U.S. dollars, the merchant gets to choose the exchange rate to convert the cost of the item. It’s called dynamic currency conversion. While the shopkeeper may seem nice, the rate used may not be so nice.

If you choose to pay in the local currency, though, your credit card network will handle the conversion. And like we said before, your card often gives you the best rate.

Pay with cash

For safety reasons, you may not want to walk around Europe with a wad of cash. But in some places, credit cards aren’t widely accepted.

Before your trip, estimate how much cash you’ll need. Convert the money at your home bank and bring it with you. You can also bring your debit card for emergency cash withdrawals or use a no-fee debit card. Just be sure that you’re using a debit card that doesn’t charge a foreign transaction fee and has a global ATM network to make sure you don’t get hit by even more fees.

Bottom line

Ultimately, choosing a card with no foreign transaction fees can help you avoid paying extra abroad. Paying with a credit card that has no foreign transaction fee in the local currency is almost always the best for your wallet. Your card network will handle the conversion rate, and you’ll have your card’s liability protections.

About the author: Kim Porter is a writer and editor who has written for AARP the Magazine, Credit Karma, Reviewed.com, U.S. News & World Report, and more. Her favorite topics include maximizing credit card rewards and budgeting. Wh… Read more.