Do Foreign Transaction Fees Apply If I Book on a US Website?
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TPG reader Ric sent me a tweet to ask about booking hotels internationally:
“Will I get charged a foreign transaction fee for booking a room at the Hilton Dubai on Hilton's US website?”
Foreign transaction fees are a nuisance to international travelers. It's pretty disappointing to come home from a trip abroad and find 3% tacked on to all your credit card transactions. Fortunately, avoiding these fees isn't difficult; the first step is knowing exactly which purchases are likely to be charged extra.
There are plenty of good reasons to book rooms on a hotel website. For starters, you generally won't earn points for reservations made through a third party, so booking directly can help you maximize your rewards. Furthermore, Hilton recently began offering savings of up to 10% when you book through Hilton.com (and I won't be surprised to see other hotels follow suit). However, while Hilton is based in the US, booking through its website doesn't guarantee that your bill will be processed domestically.
In most cases, room charges are processed by the hotel itself, while the website just facilitates the reservation. That means foreign transaction fees may apply even when you book your stay online. In general, you can expect to incur a fee for any purchase you make in a foreign country, or even if the merchant just uses a foreign credit card processor. Many hotels (and other businesses) have started letting customers pay in their native currency using a process called dynamic currency conversion, but that actually doesn't get you off the hook for foreign transaction fees, and adds another charge on top.
Some international prepaid stays and vacation packages may be processed domestically, but the problem is that you're not likely to know whether that's the case until after you pay. Depending on the cancellation policy, you could be stuck with the fee. However, there's a fairly simple remedy.
There's a growing list of credit cards that don't charge foreign transaction fees; if you want to make sure you won't have to pay extra, using one of these cards is your best bet. The Citi Hilton HHonors Reserve Card is a good option for Hilton stays, since you'll earn 10 points per dollar spent while avoiding fees. For general travel and other purchases abroad, I like both the Chase Sapphire Preferred Card and the Citi Premier® Card.
A shameful number of premium rewards cards still charge foreign transaction fees, but I think the tide is turning. Several travel rewards cards have dropped these fees over the past year, and as cardholders continue to let their dollars speak, I think these fees will become less common.