How Much Do Credit Card Charge for Foreign Currency Transactions?
You probably plan to use your credit card for foreign transactions, but have you ever considered the fees for foreign currency transactions? Credit card issuers and banks charge a foreign currency fee for all transactions made outside the country.
Foreign currency transaction fees range between 1 and 3 percent of the total amount spent per transaction. The fees depend on the credit card used. For instance, Visa charges one percent, while American Express charges 2.7 percent per purchase.
Most people use credit cards for purchases when visiting foreign countries. Going for a vacation abroad is costly, giving more post-vacation blues once you find out about the extra card charges. Luckily, you can save yourself from these additional fees.
This guide will show you the charges for foreign currency transactions and how to avoid unnecessary fees to save money. Learn how much credit card issuers and banks charge overseas travellers and how you can avoid the fees.
What Is A Foreign Currency Transaction Fee?
A foreign transaction fee is a fee for credit card issuers, and banks charge credit card users for any transactions in a foreign currency. It also applies to all transactions through a foreign financial institution.
Banks and credit card issuers charge different fees, depending on the institution’s terms and conditions. These rates are written on credit card terms, which most people ignore when signing up for one.
The rates range between 1 percent and 3 percent for each credit card transaction. Although these rates seem low, they can pile up fast. However, some credit cards don’t charge foreign transaction fees.
The fee consists of two parts; the network or card issuer fee and the bank fee. Networks like Visa and MasterCard charge a 1 percent fee on international transactions. American Express is more expensive, and it charges 2.7 percent.
Bank fees on the credit card could hike the transaction fee. For example, if your bank charges 2 percent on any international transaction, the total charges amount to 3 percent.
Before getting your credit card, review the terms to know how much the bank charges. The information about international transaction fees is under Pricing and Terms, or Rates and Fees.
Using a credit card when travelling is advantageous. Therefore, don’t let transaction fees discourage you from having one. Thankfully, you can avoid these fees in various ways.
How to Avoid Foreign Transaction Fees on Credit Card
Most travellers budget for their trip to prevent post-vacation blues. However, most get shocked to find extra fees on their credit card transactions. Find out some ways you can save more on your international getaways.
Exchange Your Money before Leaving
The excitement of leaving the country for a few days can be overwhelming, but when getting your hair and nails done, also ensure you exchange your currency. Although you will carry cash during the trip, you will save more.
You can do the exchange at a bank or credit union because they offer low exchange rates. Exchanging money at the airport costs more because of the demand, but you can do the exchanges at far away kiosks.
Although carrying cash during your trip saves you from foreign transaction fees, risks are involved. You can easily lose your money, which is less convenient than a credit card. You also don’t earn points on your spending using cash.
Get a Card with Zero Foreign Transaction Fees
If you feel unsafe carrying cash around, get a debit card with no transaction fee. You can withdraw cash from ATMs, make purchases and pay for hotel rooms and tours without extra charges.
However, debit cards have their downsides. They are easy and efficient but less secure than credit cards. In addition, once your debit card information is stolen, the issuing bank could take a long time to get the stolen money. Therefore, you should always monitor your transactions and report any suspicious activities.
Get a Fee-Free Credit Card
Some credit card issuers don’t charge a foreign transaction fee on international purchases. These are perfect for frequent travellers who want to save more on their trips. Credit card issuers that don’t charge credit fees are Chase, Capital One and Discover.
Another way to save money on an international trip is to avoid foreign ATMs. They seem convenient, but they are expensive. Instead, withdraw all the money you need at a go. You will incur fewer transaction fees than making many trips to the ATM.
Alternatively, you can research to see if your bank has a foreign ATM partner in the country you are visiting. These charge little to no fees when withdrawing cash.
Credit Card Charges for Foreign Currency Transactions
Although credit card charges have two parts, they are indicated as a single charge in your credit card statement. Also, the percentage credit card holders charge on foreign transactions is calculated on the total bill.
For example, if you booked a hotel room worth $100 and have a MasterCard, all the fees will be added to the $100. So, MasterCard charges 1 percent of the transaction, and the bank or your financial institution charges 2 percent. You will end up paying $103 for the hotel room.
Also, exchange rates play a major role in the amount charged because you must convert the currency into your country’s currency. Therefore, if the rates are high, you could pay more.
Some merchants will offer to charge you in US dollars upfront through dynamic currency conversion. Travellers should avoid these offers because they have unfavourable exchange rates.
Merchants who set the currency to USD for travellers use their currency exchange rates. Unfortunately, they set the rates too high in most cases to get profits, which is a loss to the traveller.
Advantages of Using a Credit Card When Travelling
Although most people fear foreign transaction fees, using a credit card has many advantages, including the following:
They Offer Travel and Rental Insurance
Many things happen when travelling. For example, you could miss a flight, cancel your trip, or get a medical issue. Getting a credit card that offers insurance to cover these misfortunes saves you from other expenses.
You can also get a card with car rental insurance. This is great for frequent travellers who rent a car once they reach their destination.
Credit cards reward the users with points after completing a transaction. You can then redeem these points in cash and exchange them with travel discounts or gift cards. You can also use your card rewards to get rebates on banking products.
A Flexible Way to Transact
Most bookings happen online, which is only possible if you have a card or bank app. It includes booking hotels, flight tickets and shuttles. These hotels and flights also require travellers to book months before the travel date.
A credit card will be helpful if your trip is in a month and you don’t have enough cash in your account. With a higher credit limit, you can enjoy better hotels and flights and have a more memorable holiday.
Foreign currency transactions increase the amount spent during international transactions, making you pay more. In addition, banks and credit card issuers charge differently depending on their terms. However, you can avoid these fees by exchanging currency before leaving the country and getting the no-fees card.