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Foreign Transaction Fees: What They Are & How to Avoid Them

If you’ve ever traveled internationally, you’ve probably encountered foreign transaction fees. They add a couple of dollars to every purchase and withdrawal you make, quickly eating away at your vacation budget. 

Since it isn’t always easy to distinguish what counts as a foreign transaction, any international transaction can feel like a headache. Thankfully, you can avoid most of the fees with some smart financial planning ahead of time. 

The following five solutions will help you better understand how to avoid foreign transaction fees:

  1. Get a Credit Card Without a Foreign Transaction Fee

  2. Open a Bank Account Without a Foreign Transaction Fee

  3. Exchange Currency Before Traveling

  4. Avoid Foreign ATMs

  5. Ask Your Bank About Foreign Partners 

We’ll elaborate on each of these steps later in the article. We’ve also included some excellent options for travel credit cards, so you can travel without worrying about your budget. 

What is a Foreign Transaction Fee?

A foreign transaction fee, also known as a currency conversion fee, is a type of convenience charge issued by banks and credit card companies on purchases in a foreign country. An international transaction fee can be charged when:

  • You make a purchase from a foreign bank, even when a foreign currency isn’t used. 

  • You make a purchase in a foreign country. 

  • You make a withdrawal from an ATM in a foreign country. 

  • You convert currency in a foreign country (in addition to the current currency conversion rate). 

  • You make a purchase that requires dynamic currency conversion (any credit card transaction that requires currency conversion).

The most common thorn in the side for travelers is the credit card foreign transaction fee. At first, people are excited that they can use their standard credit card in another country. But thanks to foreign transaction fees, credit card purchases can make everything more expensive than they planned.

If you travel before learning about these fees, you won’t know about them and could be left with an overcharged card.  

A Closer Look 

Foreign transaction fees are charged by United States transaction processors, such as Visa, MasterCard, and Discover. The bank issuing the card can choose to pass on the fee to the consumer. 

Most issuing banks will pass on the fee and add their own fee on top of the base rate, increasing what you have to pay. 

As information about foreign transaction fees becomes more widespread, more people are looking for ways to avoid extra fees abroad. This has led to the increase in popularity of travel credit cards. Most issuing banks do not charge international transaction fees on their travel credit cards. 

For Business Owners

Business owners who are extending their reach across borders must be particularly careful with foreign transaction fees. The same is true for those looking to start a small business. These fees can lead to unexpected credit card processing fees, even when a purchase is completed through a virtual terminal instead of a card reader

Depending on the nature of your business and how you accept credit card payments, you might need to make adjustments for foreign transaction fees. Not just with your invoice software or policies, but with how you do business. While it might not be an issue for a local barbershop, a subscription box company might run into issues depending on how they source their products. 

A business credit card that doesn’t charge foreign transaction fees is an excellent way to start safeguarding your company. You might also encounter customers with foreign credit cards, but we’ll get to that later. 

How to Avoid International Transaction Fees

Avoiding foreign transaction fees requires planning. Most of the options below will be of little use if you’re leaving the country tomorrow. If you’re preparing, however, you should be able to use one of the solutions below to minimize what you spend on fees. 

The following steps will help you avoid foreign transaction fees:

  1. Open a Credit Card Without a Foreign Transaction Fee

Below, we’ve listed three credit cards with no foreign transaction fees. Using one of these while you travel or make international purchases can solve your problem. 

  1. Open a Bank Account Without a Foreign Transaction Fee

You can also open bank accounts with no foreign transaction fees, and their debit cards serve the same purpose as a credit card overseas. Charles Schwab is a popular fee-free bank option. 

  1. Exchange Currency Before Traveling

If you exchange currency in your home country before travelling, you’ll have foreign cash and bypass the issue altogether. Travelling with cash can be risky, however, especially in areas at risk of pickpocketing. 

  1. Avoid Foreign ATMs

For those going the cash route, avoid foreign ATMs and make sure you exchange enough currency beforehand. Foreign ATM fees can be as high as $10, including the bank’s fee. 

  1. Ask Your Bank About Foreign Partners 

If your bank has a foreign partner in the country you’re travelling to, you might be able to do business with them and avoid the fees. They’ll serve as a waystation to withdraw funds. 

Credit Cards with No Foreign Transaction Fees

Chase Sapphire Preferred 

The Sapphire Preferred card is great for people with good to excellent credit who have limited experience with international travel. It comes with: 

  • No foreign transaction fees. 

  • 1x-2x reward points per dollar.

  • 60,0000-point welcome bonus.

  • $95 annual fee. 

  • 2X points on travel and dining at restaurants worldwide

  • 17.99%–26.99% variable APR. 

Click here to learn more. 

Quicksilver® from Capital One®

The Quicksilver® card is great for people with excellent credit and experience with international travel. It comes with: 

  • No foreign transaction fees. 

  • Unlimited 1.5% cash back on every purchase. 

  • $150 cash back bonus. 

  • No annual fee. 

  • 0% intro APR for 15 months; 16.24% - 26.24% variable APR after that.

Click here to learn more. 

American Express® Gold Card

The Gold Card is a solid option for people who have good credit and some experience with international travel. It comes with:

  • No foreign transaction fees. 

  • 4X Membership Rewards® points when you dine at restaurants worldwide.

  • 3X Membership Rewards® points on flights booked directly with airlines or on www.amextravel.com.

  • 19.99% APR for pay over time feature, 26.99% APR for cash advances. 

  • $250 annual fee. 

Click here to learn more. 

How to Handle Foreign Credit Cards at Your Business

The SumUp Air Lite Card Reader enables small businesses to accept credit, debit and contactless payments with a single device.

Handling foreign credit cards is intimidating for many small business owners. Will you be able to process the transaction? Will you have to pay any fees?

SumUp offers a simple solution to the problem. They offer transparent pricing and a flat Virtual Terminal transaction fee of 2.95% + $0.15.

That means you’ll never pay extra to accept payments from foreign credit cards and it won’t impact your business at all! The SumUp card reader accepts all credit cards and has excellent customer service, should you ever encounter an issue. 

Check out the links below to continue reading and learning about small business, finance, and more: 

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Lindsey McGee