What you should know about foreign transaction fees

Foreign transaction fees, also called foreign purchase transaction fees or foreign currency transaction fees, are important to consider when using any form of electronic payment while traveling abroad.

What is a foreign transaction fee?

 A foreign transaction fee is a charge assessed by your credit card issuer on transactions made in any currency other than U.S. dollars (USD). This isn't just limited to brick-and-mortar locations abroad. It also includes websites based outside of the U.S.

Foreign transaction fees typically range from one to three percent on average. But there are issuers that do not impose foreign transaction fees on the cardmember as well. 

How to avoid foreign transaction fees 

The easiest way to avoid foreign transaction fees is to get a credit card that doesn't apply them, if you don't already have one. But there are other ways to get around added fees while traveling. 

Choose the local currency 

If you're using your credit card for a purchase in another country, you may be asked if you'd like to use USD or the local currency. Choosing the local currency may be the better move here. That way, you're able to pay for everything using the local currency, without having to worry about vendors along your trip not accepting USD. 

If you choose USD, the merchant decides the exchange rate, which could be inflated. This practice is called dynamic currency conversion. 

If you opt to pay with the local currency, your bank will deal with the conversion and likely give you a better rate.

Pay with cash 

You may not want to walk around an unfamiliar place with a ton of cash. But also, you might find yourself in a location where credit cards aren't widely accepted. 

Get an idea of how much cash you'll need before your trip. You can convert the money at your home bank or order the currency online and take it with you. You can also convert currency at the airport should you need some last-minute funds, but remember that some airports charge a higher percentage for currency exchange. 

Apply for a card with no foreign transaction fees

If you travel often and don't already have a no foreign transaction fee credit card, you may want to consider applying for one.