Foreign Transaction Fees: What They Are and How to Avoid Them (2024)

When you travel to a foreign country and charge expenditures in a currency other than dollars, it’s likely your credit card will charge you a foreign transaction fee. Here’s why: When you make a purchase in a foreign country, U.S. dollars need to be converted to the local currency. There are fees associated with that transaction.

Still, just because many credit cards charge foreign transaction fees doesn’t mean you have to pay them. There are ways to avoid them. First, a little more about the fees themselves.

How do foreign transaction fees work?

Foreign transaction fees can be incurred primarily in one of two situations:

  1. When you make purchases in a foreign currency.

  2. When a transaction involves a foreign bank.

    “Foreign” is the operative word. If the transaction takes place in a country or financial institution that normally uses a currency other than dollars, fees will be involved. This can even happen when you’re making online purchases from an individual or a business located in a foreign country.

    Here’s why: Whenever one currency is converted into another, there are costs. Typical cross-border transactions involve a conversion fee, which is the cost to convert one currency into another. It’s paid to the agency or organization that is facilitating the conversion.

    The alternative, widely employed by credit card companies, is a foreign transaction fee. It sets a single, flat fee consumers pay on purchase activity involving currency conversions. This avoids the complications and fluctuations that can come from converting different foreign currencies using different agencies and institutions.

    The foreign transaction fee will be stated in the credit card company’s “Terms and Conditions” disclosure, which will be available to you when you apply for the card. When you make a purchase involving a foreign currency, the credit card company will add the foreign transaction fee to the cost of your purchases.

What does a foreign transaction fee consist of?

Though the foreign transaction fee on credit cards will be disclosed as a single percentage, usually 3%, it comprises two separate fees. One is the currency conversion fee (also called a “network fee”), and the other is an issuer fee.

The network fee is charged by the credit card company itself, because it facilitates the currency conversion. It is usually 1%. The company will then add the issuer fee, which is usually 2%. This produces the 3% foreign transaction fee that you’ll see on a credit card disclosure.

How much are foreign transaction fees?

Foreign transaction fees are common and apply to most credit cards. The fee is presented as a single percentage, usually 3%. Chase, Citi, and U.S. Bank all charge a 3% fee. The American Express fee is 2.7%. Notably, Capital One doesn’t charge a foreign transaction fee for any of its cards, whether issued by Mastercard or Visa. Also, all of the above institutions offer some cards that don’t charge these fees.

Foreign transaction fee vs. currency conversion fee: What’s the difference?

A currency conversion fee is the charge imposed by an agent or a merchant when converting funds from one currency to another. If the conversion is completed by your credit card (Visa, Mastercard, or American Express), it is the network fee portion of your foreign transaction fee.

However, currency conversion can also take place with a merchant at the point of sale. When it does, it is known as “dynamic currency conversion (DCC).” It’s likely you will be given an option by the merchant to choose DCC, but it’s best avoided.

While the credit card conversion fee is just 1%, the fee charged by individual merchants for DCC can be more, and you’ll still likely be paying your card’s foreign transaction fee on top of it. In one sobering case posted by a blogger exchanging euros for British pounds at a Greek bank, the DCC fee was a whopping 18%. Fortunately, you have the right to refuse DCC, and you absolutely should.

How to calculate the final cost of your purchase with your transaction fee

Any time you make a foreign purchase, you’ll need to factor in the foreign transaction fee if your credit card charges one. In addition, you’ll also need to include the foreign currency conversion. By the time you get your credit card statement, a seemingly simple purchase can look substantially different than what took place in person.

For example, on a trip to London you make a credit card purchase for £100. Two calculations affect what you will pay for the purchase once your credit card statement arrives.

  1. Converting British pounds into U.S. dollars. At August 2023 exchange rates, £100 equals $127.
  2. Computing the foreign transaction fee. A fee of 3% is added on top of the dollar amount of the purchase.

The calculation will look like this:

£100 X 1.27 (conversion rate) = $127\$127 X .03 (3% foreign transaction fee) = $3.81

$127 + $3.81 = $130.81 (total due)

In this case the 3% foreign transaction fee will include both the 1% network fee of the credit card and a 2% issuer fee of the credit card issuer.

The final amount paid will include the $27 foreign exchange of pounds to dollars, plus $3.81 for the foreign transaction fee.

3 tips to avoid foreign transaction fees

1. Get a no-foreign-transaction-fee credit card

Though most credit cards do charge foreign transaction fees, there are a number that don’t. Most major credit card issuers do provide one or more cards that eliminate the fee. Below are three of the best credit cards with no foreign transaction fees.

CardBest forRegular APRAnnual feesCredit score needed

Foreign Transaction Fees: What They Are and How to Avoid Them (1)

Small business owners




Foreign Transaction Fees: What They Are and How to Avoid Them (2)

Balance transfers




Foreign Transaction Fees: What They Are and How to Avoid Them (3)





If you are a frequent traveler to foreign destinations, pay particular attention to travel credit cards. Amex Gold is a good example of a travel credit card because it packs plenty of travel-related benefits in addition to charging no foreign transaction fee.

Most credit cards with no transaction fee require good or excellent credit. It’s also more likely that the card will have an annual fee. This is because the card issuer is paying the fee and must recoup the cost in another way.

2. Use a debit/checking account with no foreign transaction fees

If you’re unable to qualify for a credit card without a foreign transaction fee, you may have better luck with either a checking account or a debit card that does not charge the fee. These can be easier to qualify for while providing many of the same benefits as credit cards.

For example, Chime is a banking app that provides a checking account with a debit card that does not charge foreign transaction fees. In fact, Chime has practically no fees of any kind. You can even get up to an extra $200 on debit card purchases with no overdraft fees. The Chime debit card will give you access to more than 60,000 fee-free ATMs. Chime accepts applicants with poor credit or no credit at all.

GoHenry is a stand-alone debit card for kids and teens that is very light on fees and charges no foreign transaction fee. Parents pay a $4.99-per-child flat fee for the service, ($9.98 per month for up to four children). Otherwise, transfers are free, and there are no fees to load funds on the card. There are also no transaction fees for ordinary account activity.

The app and debit card also help parents teach their children how to manage money. The app provides fun and engaging ways for kids to earn money, save it, and even give it to charities. Parents can pay their child’s allowance through the app and set up chores for pay. They can then choose how their child uses the card, either in stores or at ATMs. Parents are provided with instant notifications and spending overviews of their child’s activity with the card, so they can monitor how the card is being used.

3. 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.)

This isn’t a perfect solution, however. You will need to convert your dollars into the local currency, which will involve paying an exchange rate fee. You can do this at the bank before you leave—or at a bank or currency exchange in the country you are visiting. Either way, you will pay a fee to convert your currency. Once you convert your cash, you’ll be fully equipped with the local currency to make purchases without needing to worry about additional fees. Note that if the transaction is through a merchant that accepts dollars, you may pay a higher exchange rate than you would by letting your bank handle the conversion.

Two other issues: Cash can be lost or stolen, which would set you back a lot more than a 3% foreign transaction fee. And you may find that some countries have switched so fully to electronic payments that many vendors no longer accept cash.

Time Stamp: Avoid foreign transaction fees with a credit card that doesn’t charge them

The best way to avoid foreign transaction fees is to acquire a no-foreign-transaction-fees credit card, if you qualify for one. Next in line are checking accounts or debit cards with no foreign transaction fee.

It is also possible to avoid the fee by paying in the local currency for purchases. That option has significant drawbacks, as well, including the possibility that the conversion fee you pay to acquire currency will be higher than your credit card’s foreign transaction fee.

Frequently asked questions (FAQs)

How much is a credit card foreign transaction fee?

Generally, a foreign transaction fee is 3% of the amount being charged on the card. Some cards don’t charge one, but they generally make up for that by charging an annual fee.

How can I get a foreign transaction fee waived?

It may be possible, but it won’t be easy. You’ll need to contact your credit card company’s customer service department and request a fee waiver. This process won’t be automatic, so you’ll need to make a strong case.

The attempt will work best when you have had a credit card for many years and have an excellent payment history. You’ll need to cite these facts when making your case. Even still, there’s no guarantee the credit card company will waive the fee. Instead, it may suggest you apply for one of its credit cards that doesn’t charge the fee.

Do all banks charge a foreign transaction fee?

No, but most do—in the form of a currency conversion rate. Foreign transaction fees are a reality of transacting business across international borders. Either the bank must charge the customer for the fee, or it must pay the cost itself and make up the difference through other charges.


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