Foreign Transaction Fee vs. Currency Conversion Fee (2024)

When you use your credit or debit card in a foreign country, or online with a foreign merchant, your card issuer, usually a bank, may charge a foreign transaction fee of 2% to 3% of the purchase price. At the same time, the credit card payment processor, such as Visa or Mastercard, may tack on an additional 1% currency conversion fee. Here is how these fees work and what you can do to avoid or at least lessen them.

Key Takeaways

  • Using a credit or debit card in another country can result in foreign transaction fees as well as currency exchange fees.
  • The two fees are often combined and referred to as a single foreign transaction fee.
  • Some merchants offer dynamic currency conversion (DCC), which shows purchase prices in U.S. dollars rather than the local currency.
  • DCC is almost always more expensive, sometimes considerably so.
  • These fees can be avoided or minimized, particularly by choosing cards without them.

Foreign Transaction Fee vs. Currency Conversion Fee (1)

What Is a Foreign Transaction Fee?

Many, but not all, credit and debit card issuers and ATM networks charge a per-transaction fee on purchases or withdrawals made overseas or when ordering online with a foreign merchant. The fee varies but typically runs between 2% and 3% of the dollar amount of the purchase or withdrawal.

For example, suppose you travel to Paris, spend the equivalent of $1,000 in a department store, and charge the purchase to your credit card or pay for it with your debit card. With a 3% foreign transaction fee, you will notice a $30 surcharge when you receive your statement. That's the result of a foreign transaction fee imposed by the card issuer.

Alternatively, suppose you run out of cash and decide to use an ATM that charges a 3% transaction fee to obtain $1,000 (dollar equivalent) in euros. The actual cost to you will be $1,030 for $1,000 worth of euros. By the way, sometimes the foreign transaction fee is called a foreign exchange fee. At one time it was called a currency conversion fee, but that fee is now something completely different (see below).

What Is a Currency Conversion Fee?

A currency conversion fee is an additional charge for converting a transaction from one currency to another, such as from the local currency of the country you are visiting to U.S. dollars. There are two types of currency conversion fees: those charged by a credit or debit card payment processor or ATM network and those charged through a process known as dynamic currency conversion (DCC).

When the conversion is done by your card's payment processor, the charge is typically 1% of the purchase amount. When the conversion happens through DCC, the charge is usually more—up to 12%, according to one study cited by the European Consumer Organisation. It calls DCC "a scam."

Another difference between the two types of currency conversion has to do with how soon you will know the cost of the conversion. When your card's payment processor levies the charge, you will not know the true cost of your purchase in dollars until your statement arrives or posts online. (You can get around this by using a currency exchange rate app, such as the Xe Currency Converter, and adding your card's foreign transaction fee to the purchase price.) With DCC, you will see the difference immediately on your receipt or on a terminal at the point of sale.

As DCC usually costs more, it's up to you to decide if the potentially whopping extra charge is worth knowing the cost immediately. Keep in mind that DCC does not replace your card's foreign transaction fee. You will still pay that fee in addition to the DCC fee. The merchant cannot simply use DCC without your consent. You have the right to refuse.

How the Fees Can Add Up

Here's where it gets a little complicated: Often the foreign transaction fee you pay will have the currency conversion fee built in. For example, your total fee might be 3%, with 1% consisting of the currency conversion fee and 2% accounting for the transaction fee.

Visa and MasterCard charge a 1% currency conversion fee to the card issuer. The issuer has the option to pass along that fee, along with any additional fees it decides to add, and call the whole thing a foreign transaction fee. Some card issuers, especially those that offer cards geared toward frequent travelers, charge no fee at all.

The table below shows the main types of foreign credit and debit card fees, who charges them, and how much they typically are.

Types of Foreign Credit Card Fees
Type of FeeImposed OnImposed ByRate
Foreign TransactionOverseas credit card transactionsIssuer2% to 3%
Currency ConversionOverseas currency conversionProcessor1%
Dynamic Currency ConversionOverseas point-of-sale conversionMerchant3% to 12%

Avoiding (or Minimizing) These Fees

Whether it's a foreign transaction or currency conversion fee, it's always better to pay no fee. Here are some ways to avoid or minimize fees when traveling and spending abroad:

  • Check your card's fees under "terms and conditions" and, if appropriate, apply for a card with zero foreign transaction fees before you travel.
  • Get some cash before you leave home to minimize trips to an ATM and the resulting fees.
  • Check whether your bank is part of a "no fee" or "low cost" global ATM network.
  • Beware of deceptive ATMs and terminals that try to disguise DCC.
  • Always pay in local currency with your cards and decline DCC if a merchant offers it to you.
  • You'll also avoid fees if you pay in cash, although you may not want to carry a lot of it for security reasons.

Who Sets the Interest Rate on Dynamic Currency Conversions?

In a dynamic currency conversion (DCC), the merchant and their bank set the rate, so it may vary from one store to another. DCC transactions can be more profitable for merchants, which is a major reason they may try to push them.

Is It Better to Use a Credit or Debit Card Abroad?

Credit cards have a couple of advantages over debit cards for overseas travel. One is that they are more likely to offer rewards like cash back or airline miles on purchases (although some debit cards now have this feature, as well). More important, credit cards have greater consumer protections. In most cases your liability for fraudulent purchases is limited to $50, and some card issuers have $0 liability policies. With debit cards, a thief could potentially drain your entire bank account.

Can You Just Use U.S. Dollars in Other Countries?

Yes, the U.S. dollar is widely accepted by merchants in many countries, including Canada, Mexico, and various popular vacation spots. In some countries, the U.S. dollar is even the official local currency. But you'll want to find out before you go.

The Bottom Line

If you're heading overseas (or across the U.S. border) for travel, you can make your money go a lot further if you avoid foreign transaction fees whenever possible. Spend the money on fun instead.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy.

  1. BEUC, The European Consumer Organization. "The Great Currency Conversion Scam."

  2. Payments Consulting Network. "What Is Dynamic Currency Conversion?"

  3. Federal Trade Commission Consumer Advice. "Lost or Stolen Credit, ATM, and Debit Cards."

  4. Frommer's. "Places You Can Use the U.S. Dollar Instead of Local Currency."

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Foreign Transaction Fee vs. Currency Conversion Fee (2024)


Is a foreign transaction fee the same as a conversion fee? ›

While a foreign transaction fee is charged by your credit card issuer, a currency conversion fee can be charged by the credit card payment processor or the individual merchant.

Can you avoid conversion fees? ›

Pay in the local currency

You can avoid your credit card's foreign transaction fee entirely by paying for purchases in foreign countries using the local currency instead of your U.S. credit card (or American dollars, if the vendor accepts them.)

What is foreign conversion transaction fee? ›

An international transaction fee is a commonly encountered type of credit card fee that you may be subject to if you use your credit card at a non-Australian retailer. This fee is charged by your credit card issuer and is typically a percentage — typically around 3% — of the purchase amount.

What is a reasonable foreign transaction fee? ›

Foreign transaction fees are typically around 2-3% of each transaction in U.S. dollars. 1 This fee might consist of a 1% fee charged by the payment processor, such as MasterCard or Visa, plus another 2% fee charged by the card issuer, such as Bank of America or Wells Fargo.

What is the difference between a transaction and a conversion? ›

A transaction is recorded on every invocation to the conversion tracking code. Essentially, a visitor can make multiple transactions but only a single conversion.

What is the difference between conversion and transaction? ›

A conversion rate is the percentage of visitors to your website who complete a transaction. A transaction for an e-commerce site is usually a sale. Transactions can be different for every site and could be a free download, newsletter subscription, donation, quote request or other activity.

Is it better to exchange currency or use credit card? ›

Using a credit card with no foreign transaction fees and choosing to make purchases in local currency will nearly always save you money. Currency conversion apps can help you better understand pricing and identify hidden charges.

How do I avoid conversion fees abroad? ›

Several options exist to help you avoid foreign transaction fees when you travel abroad.
  1. Apply for a Credit Card With No Foreign Transaction Fees. ...
  2. Get a No-Fee Chequing Account or Prepaid Card with No Foreign Transaction Fees. ...
  3. Don't Use International ATMs Without Checking the Fees First. ...
  4. Exchange Cash Before Leaving Canada.
Feb 19, 2024

Which cards don t charge foreign transaction fees? ›

  • Discover it® Balance Transfer. 4.8. ...
  • Best in Cash Back and No Annual Fee Credit Cards. Discover it® Cash Back. ...
  • Discover it® Miles. 4.2. ...
  • Hilton Honors American Express Card. 4.5. ...
  • United Gateway℠ Card. 4.2. ...
  • IHG One Rewards Traveler Credit Card. 4.5. ...
  • Discover it® Chrome. 4.5. ...
  • Capital One SavorOne Cash Rewards Credit Card. 4.2.

Why have I been charged a foreign currency conversion fee? ›

A currency conversion fee is a charge that can be levied on credit or debit card users when they make a financial transaction abroad. Credit and debit card users may also have to pay a foreign transaction fee if their card charges one. Sometimes the currency conversion fee is included in the foreign transaction fee.

Does Visa charge a currency conversion fee? ›

Visa and MasterCard charge a 1% currency conversion fee to the card issuer. The issuer has the option to pass along that fee, along with any additional fees it decides to add, and call the whole thing a foreign transaction fee.

What is the bank of America foreign conversion fee? ›

A Bank of America International Transaction Fee of 3% will apply when converting your currency. 8 • If you have any issues with your cards while traveling, please call the number on the back of your card. Please visit for a complete and current listing before you travel.

Is a 1% foreign transaction fee a lot? ›

A foreign transaction fee is a fee charged by a credit card issuer or bank for every transaction made in a country outside of the U.S. Fees vary depending on the credit card or bank's terms and conditions, but usually fall between 1% and 5% of the purchase amount.

Is a 3% foreign transaction fee bad? ›

Foreign transaction fees generally range from 1 percent to 3 percent and tend to average around 3 percent of each transaction. Paying around $3 per $100 you spend may not sound that expensive, but these fees can add up if you're making a lot of purchases with your credit card.

What is the 3% fee charged on foreign transactions? ›

A foreign transaction (FX) fee is a surcharge on your credit card bill that appears when you make a purchase that either passes through a foreign bank or is in a currency other than the U.S. dollar (USD). This fee is charged by many credit card issuers, typically ranging from 1% to 3% of the transaction.

How do I know if my credit card has a foreign transaction fee? ›

Not all credit cards charge a foreign transaction fee, but many do. To find out if your card does, check the “fees” section of the terms and conditions for your card.

What is the meaning of foreign transaction? ›

Foreign Transaction means any transaction made in a foreign currency (including, for example, online purchases from foreign merchants).

What is a conversion transaction? ›

Conversion Transaction means a transaction where the Customer purchases one currency by virtue of sale of another currency.

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