Have you ever found yourself wondering why an extra $150 was charged to your credit card after a vacation in Europe? If so, you have probably experienced a foreign transaction fee.
But what is a foreign transaction fee? Foreign transaction fees are charges that credit card companies attach to purchases made with foreign currency or through foreign banks.
You can even be charged foreign transaction fees despite not leaving the country. There’s so much to learn about foreign transaction fees.
So, what is a foreign transaction fee exactly? And how can you avoid them? Let’s find out!
How do foreign transaction fees work?
Foreign transaction fees are charges made by credit card issuers on overseas transactions with foreign merchants. With cards that charge foreign transaction fees, you can expect to be charged any time a purchase is made with currency other than USD. Any foreign transaction fees that you accrue will appear on a separate line on your credit card statement each month.
Foreign transaction fees are typically 2-3% of the amount charged. Not all card issuers or credit cards don’t charge a foreign transaction fee. Here is what you need to know about avoiding foreign transaction fees.
How are foreign transaction fees calculated?
Foreign transaction fees are calculated as a percentage of the total purchase amount in dollars. A typical US credit card charges a 3% foreign transaction fee.
- One percent is charged by the payment processor, such as Mastercard or Visa.
- Two percent is charged by the card issuer, such as Chase, Bank of America, or Wells Fargo.
Is an international transaction fee the same as a foreign transaction fee?
An international transaction fee is the same as a foreign transaction fee. They are both charges for transactions that are made using a domestic credit card either in a foreign country or with foreign currency.
What’s the difference between a foreign transaction fee and a currency conversion fee?
A foreign transaction fee is not the same as a currency conversion fee. A foreign transaction fee is charged for using a credit card abroad, whereas a currency conversion fee is charged by the bank, store, or other intermediary that is converting one currency to another. If you’re not careful, it’s possible to end up paying both a foreign transaction fee and a currency conversion fee on certain charges.
Should I use cash instead to avoid transaction fees?
You can use cash to avoid paying transaction fees. However, the currency conversion rate, in addition to fees at airports and other currency exchanges that tourists face, will often be more expensive than the foreign transaction fee alone.
If you can withdraw cash directly from a US bank account, you will only need to pay your bank’s ATM fee, which is typically around $5. This will always be less expensive than the costs of a foreign transaction fee and a currency conversion fee. Even so, you can use cash, but it is not the best option.
Do foreign transaction fees apply online?
Foreign transaction fees apply online if the currency used by the merchant is not already converted to USD. Some merchants will give you a choice between local currency or USD. No matter if you’re buying something online or making an in-store purchase, always select USD to avoid the foreign transaction fees.
The one exception is if merchants do not allow you to convert from a foreign currency to USD. For example, if you are purchasing an item and the merchant only accepts payment in British pounds, you will inevitably be charged a foreign transaction fee.
How do I avoid foreign transaction fees?
It is actually quite easy to avoid foreign transactions with a little planning. Here are our best tips:
Ask to be charged in USD
You can avoid foreign transaction fees entirely by asking the merchant if they can charge you in USD. Many merchants already offer this option, especially in European countries and other major tourist destinations. Some merchants will even ask you whether you prefer USD or the local currency before they charge your card.
Choose cards with no foreign transaction fees
Selecting a credit card that advertises no foreign transaction fees is a simple way to avoid worrying about foreign transaction fees. Credit cards designed for frequent travelers and issued by airlines or hotels often offer no foreign transaction fees. However, these cards sometimes require an annual fee, so you’ll want to research the specifics of every credit card before deciding on the best one for you.
Open a MoneyLion RoarMoney account
With a RoarMoney account, you can enjoy $0 foreign transaction fees no matter where in the world you make purchases. The only fee associated with the account is a $1 monthly management fee.
A RoarMoney debit card can be used just like a credit card, and the best part is that you can pay with it anywhere in the world without added fees. You’ll get market currency conversion rates and no foreign transaction fees, making it ideal for travelers.
RoarMoney $0 foreign transaction fee bank account
A RoarMoney $0 foreign transaction fee bank account gives you instant access to your funds. Plus, you won’t have to worry about foreign transaction fees or other hidden charges. There are no account opening fees, minimum balances, or returned item fees.
In short, a MoneyLion RoarMoney account ensures that you’ll avoid banking fees. For example, the spend tracker that comes with a RoarMoney account is one of the best tools for preventing overdraft fees.
Compare traditional bank fees vs MoneyLion RoarMoney
It can be overwhelming to find a bank that meets your needs without charging high fees. A RoarMoney account offers all of the benefits of traditional banking without the fees. You can see a comparison of traditional banking and RoarMoney fees here:
|Traditional bank fees||RoarMoney fees|
|Account opening fee||$0-$100||$0|
|Minimum balance fee||$0-$25||$0|
|Foreign transaction fee||0-3%||$0|
|Stop payment fee||$20-$30||$0|
|Inactivity fee||$0-$5 per month||$0|
|Return item fee||$20-$40||$0|
Plan now to keep saving
Making a plan to avoid foreign transaction fees is a great way to prevent unexpected charges that could deplete your savings. The best two-step approach is to select a credit card that doesn’t charge transaction fees and then apply for it. You can also open a RoarMoney account.
It will help you monitor expenses, build savings, and avoid foreign transaction fees as well as all other hidden or unexpected fees! Learn more about building credit in other countries by reading about country-specific credit score requirements.