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.
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.
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.