Why do banks charge foreign transaction fees?

Banks need to convert your money into U.S. dollars so that your transactions can be charged to your account. Unfortunately, this conversion process costs money, and card-issuing banks pass on these costs to consumers in the form of foreign transaction fees.

What is the difference between the foreign exchange fee and the foreign transaction fee?

Basically, foreign exchange fees are charged for the conversion of foreign purchases into U.S. dollars, while a foreign transaction fee charges you for the processing of your transaction outside of the U.S. And since these are two different charges, you will need to pay for both on a single transaction, although the two components are usually bundled into a single fee of around 3% of the purchase price

Will I still get charged a foreign exchange fee?

You may not be charged a foreign exchange fee if you opted for Dynamic Currency Conversion at the point of sale. But your card issuer may still charge you a fee simply for processing a foreign transaction—all it takes is to have the transaction pass through a foreign bank, and it will be flagged as a foreign transaction.

Will I get charged foreign transaction fees when shopping from an overseas online store?

If you use your card to purchase items online from a retailer outside the country you will be charged a foreign transaction fee, unless you have a card that doesn't charge foreign transaction fees.

Will I get charged for using my credit card abroad?

Unfortunately, credit cards carry a number of fees when they’re used abroad, and generally, you may be charged the following fees: ● A foreign transaction fee of about 3% comes with every purchase or transaction unless you have a card that doesn't charge foreign transaction fees. ● A withdrawal fee that is charged every time you withdraw money from an ATM—a fee that may be higher than the one charged for using an ATM in the U.S. But a card with no foreign transaction fees may also have free use of overseas ATMs. Read the fine print to find out.

How do I avoid foreign transaction fees on my credit card?

If you don’t like the idea of getting charged extra fees every time you use your card overseas, here are a few things you can try for a smoother travel experience: ● Find a credit card with no foreign transaction fees ● Open a bank account which doesn’t have foreign fees before traveling ● Exchange currency to your desired amount before you travel ● Pay using the local currency

How much is a foreign transaction fee?

Generally, foreign transaction fees are around 3% of every transaction converted into U.S. dollars, although fees vary from bank to bank and may be higher or lower. Typically, the fee consists of a 1% fee from Visa, Mastercard or Amex—the payment processors—along with a 2% charge from the bank or financial institution issuing the card.

What does "no foreign transaction fee" mean?

This means that a credit or debit card doesn’t include an added charge for purchases made from merchants located outside of the country, whether in person while traveling, or online while in the U.S.

Do credit cards work internationally?

Yes, assuming that the restaurant, hotel or store accepts the type of card you have. Most cards can be used outside the U.S. for dining out, shopping, and more. They basically work anywhere else as they would when you use them while inside the U.S., and if available, even the contactless option should work. (It's a good idea to make sure your card has a PIN you can use for purchase verification since this is the standard practice in many countries.) Credit cards can also be used to withdraw from most overseas ATMs if you’re in need of cash. But again, make sure you’re aware of the currency conversion and foreign transaction fees if you don't have a card without these fees.

Credit Cards with No Foreign Transaction Fees from the USA

No foreign transaction fee credit cards

Compare credit cards that don't charge a fee when buying in foreign currency.

Updated Dec. 4, 2023 |

Sometimes called international fees, foreign transaction fees are charges that financial institutions apply to purchases processed overseas or using a foreign currency. Fees vary depending on the card issuer, but a typical foreign transaction fee is a surcharge of 3% on top of the purchase price after any conversion to U.S. dollars. While this may turn people away from having an overseas vacation too often, or from shopping online at international websites, there are many cards with no foreign transaction fees. There are even card issuers, like Capital One and Discover, who waive these fees on all their cards.

Cards with no foreign transaction fees may also come with other travel benefits, so it’s always worth taking a look at what else they can offer you before deciding which card to get.

Key benefits

No foreign transaction fee cards let you spend in and out of the country without having to worry about getting charged an extra amount — about 3% — on every purchase. This means that they may be worthwhile for anyone who travels overseas regularly, or who often makes online purchases from websites with transaction processing centers located outside the U.S.

Features

Because many travel credit cards have no foreign transaction fees, it’s best to look for other features to determine which card can give you the most value. Some of the best features to look for in no foreign transaction fee cards include:

Great sign-up bonuses. Many cards offer extra value to their users by giving them bonus rewards during their first year of use. Typical bonuses include thousands of additional rewards points or airline miles able to be earned in the first few months after account opening, or an introductory cash back bonus, or an introductory APR, and more.
Reward rate. Everyone has different spending habits, so it’s best to pick out a card with rewards that suit your needs and lifestyle. Examples of reward rates include 3X points on travel (that is, three points per dollar spent on travel), 2X miles on all purchases, 5% cash back on selected spending categories which change each quarter.
Rewards program. The type of reward you earn is just as important as how much you earn. There's not much to be gained by earning air miles if you don't plan on regular air travel, and earning cashback on your purchases can often be easier and more beneficial than collecting points.
Benefits and Perks. Cards that charge a higher annual fee need to have plenty of benefits and perks so that users can consider keeping them for longer. For those who love to travel, rewards such as airport lounge access, elite hotel status membership or travel credits can be highly beneficial.

Alternatives to no foreign transaction fee cards

If you don't want to use a credit card, even one with no foreign transaction fees, there are other ways to pay:

Debit cards. For those who don’t want to carry around cash or use a credit card, a great alternative to look into is debit cards. As long as it carries a major card logo, a debit card can be used anywhere that cards are accepted. This is a great choice since the card is linked to your bank account and automatically withdraws funds when you make a purchase with the card. So, you only spend money that you already have and won’t face the risk of getting into debt. But you'll still pay foreign transaction fees, unless your card is linked to an account with one of the very few banks who don't charge this fee.
Prepaid cards. You can also get a prepaid card, which works in a similar way to a debit card, except that it is preloaded with a fixed amount of cash instead of being linked to your bank account. You can buy the cards at places like grocery stores and drug stores, some banks, and online. The cost includes the initial cash amount, and you may be able to re-load it with more cash later.
PayPal. By now, most people have a PayPal account, and for good reason. Not only does it provide protection against faulty goods and fraud, but it also connects to your bank account to make seamless, interest-free payments. In addition, PayPal has introduced its own debit cards and prepaid cards.