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What is a foreign transaction fee?

Aug. 29, 2021
5 min read
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Editor’s note: This post has been updated with new information.


There’s very little that we dislike more here at TPG than unnecessary fees — including foreign transaction fees. You may have noticed that when you use some credit cards abroad (or on a website not hosted in the U.S.), an additional fee gets tacked on to each purchase.

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Today, I’m walking through what those fees are and how you can avoid them in the future.

What are foreign transaction fees?

Foreign transaction fees are charged on certain cards when you make a purchase that goes through an overseas bank to process the transaction. When you make a transaction while traveling or while on a non-U.S. website, banks may have to convert the purchase into U.S. dollars. On some credit cards, issuers will then pass the cost of conversion over to consumers.

Generally, foreign transaction fees hover around 3% for most issuers — Visa and Mastercard charge a 1% fee to banks for processing purchases made abroad, and many U.S. issuers tack on an additional 1%-2% fee on top of that.

Card issuerStandard foreign transaction fee
American Express2.7%
Barclays2.99%
Bank of America3%
Chase3%
Citi3%
U.S. Bank3% for different currencies; 2% for US$ transactions
Wells Fargo3%

How to know if my card charges foreign transaction fees

Card issuers are required to give potential and existing customers access to rates and fees associated with a credit card, including foreign transaction fees. Check the terms and conditions of your credit card to see whether or not your card (or the card you’re considering applying for) charges foreign transaction fees.

When looking at the rates and fees table, you can typically find the foreign transaction fee listed explicitly under a fees section.

The fees for the Chase Freedom Unlimited. (Screenshot courtesy of Chase)

Foreign transaction fees vs. ATM fees

Another type of fee you may hear about when you travel is a foreign ATM fee. While the two fees both can apply when you are traveling outside the U.S., they are not synonymous.

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A foreign ATM fee is charged when you withdraw cash from an ATM in a foreign country. Some banks waive this fee, especially if you use an ATM that falls within a specific network of banks.

Additionally, you might be on the hook for additional fees when you use an ATM abroad, including a flat fee from your bank for using an ATM not affiliated with the bank (which is typically $5), a foreign currency conversion fee (which typically falls in line with foreign transaction fees at 3%) and additional fees charged by the owner of the specific ATM you use.

This is one reason why we recommend paying with a credit card wherever you can. But in some places, cash is still king and you’ll need to have a game plan for avoiding these types of fees — or factoring them into your budget.

Related: Ways to save on overseas ATM withdrawals

Using an ATM abroad could come with other pesky fees. (Photo by Vera Arsic/EyeEm/Getty Images)

How to avoid foreign transaction fees

The easiest way to avoid foreign transaction fees is to use a card that doesn’t charge them. TPG has a regularly updated guide on the top credit cards with no foreign transaction fees that can help you figure out the best cards to use for your trips.

One of the perks of the Capital One Venture Rewards Credit Card is that it has no foreign transaction fees. (Photo by The Points Guy)

Most of the top travel credit cards don’t charge foreign transaction fees. In fact, it’s rare for a card that offers travel rewards and perks to charge any foreign transaction fees. Unfortunately, cash-back cards such as the Chase Freedom Unlimited and the Blue Cash Preferred® Card from American Express (see rates and fees) tend to charge foreign transaction fees. But keep in mind that some issuers, including Capital One, don’t charge foreign transaction fees at all across their cards.

Of course, you’ll also avoid foreign transaction fees by paying with cash. But those purchases won’t earn you any rewards, and withdrawing cash while abroad may be subject to its own set of pesky fees.

Bottom line

The good news is that foreign transaction fees are a lot less common across top credit cards than they used to be. Hopefully, the industry as a whole is moving away from charging customers these types of fees.

Until then, make sure you’re checking your credit card’s terms and conditions to know if you’ll be on the hook for a fee when you’re traveling and plan your card usage accordingly.

Additional reporting by Stella Shon.

For rates and fees of the Blue Cash Preferred card, click here.

Featured image by Getty Images
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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Our points-obsessed staff uses a plethora of credit cards on a daily basis. If anyone on our team wouldn’t recommend it to a friend or a family member, we wouldn’t recommend it on The Points Guy either. Our opinions are our own, and have not been reviewed, approved, or endorsed by our advertising partners.
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TPG featured card

Best premium travel card for value
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

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1xEarn 1 point per $1 spent on all other purchases

Intro offer

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Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®

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Recommended Credit

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Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

If you are looking to take your premium rewards to the highest level, this card is really a no brainer in our eyes. Chase's Ultimate Rewards make points easy to redeem, with a wide range of 10 airline and three hotel transfer partners and a friendly user interface. Despite the high annual fee, Chase is consistently adding new benefits to keep the card competitive in a fierce premium rewards field.

Pros

  • $300 annual travel credit as reimbursement for travel purchases charged to your card each account anniversary year
  • Access to Chase Ultimate Rewards hotel and airline travel partners
  • Unlimited 3x points on the broad category of travel and dining
  • 50% more value when you redeem your points for travel through Chase Ultimate Rewards®
  • Broad definitions for travel and dining bonus categories

Cons

  • Steep $550 annual fee
  • May not make sense for people that don't travel frequently
  • You must spend the $300 travel credit before earning 3x points for travel and dining
  • No automatic hotel elite status
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year.
  • Earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,200 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,300+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select and up to $100 application fee credit every four years for Global Entry, NEXUS, or TSA PreCheck®
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more
Best premium travel card for value
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10xEarn 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards®.
5xEarn 5x total points on flights through Chase Ultimate Rewards®.
3xEarn 3x points on other travel and dining.
1xEarn 1 point per $1 spent on all other purchases
  • Intro Offer
    Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®

    80,000 bonus points
  • Annual Fee

    $550
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
    Excellent

Why We Chose It

If you are looking to take your premium rewards to the highest level, this card is really a no brainer in our eyes. Chase's Ultimate Rewards make points easy to redeem, with a wide range of 10 airline and three hotel transfer partners and a friendly user interface. Despite the high annual fee, Chase is consistently adding new benefits to keep the card competitive in a fierce premium rewards field.

Pros

  • $300 annual travel credit as reimbursement for travel purchases charged to your card each account anniversary year
  • Access to Chase Ultimate Rewards hotel and airline travel partners
  • Unlimited 3x points on the broad category of travel and dining
  • 50% more value when you redeem your points for travel through Chase Ultimate Rewards®
  • Broad definitions for travel and dining bonus categories

Cons

  • Steep $550 annual fee
  • May not make sense for people that don't travel frequently
  • You must spend the $300 travel credit before earning 3x points for travel and dining
  • No automatic hotel elite status
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year.
  • Earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,200 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,300+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select and up to $100 application fee credit every four years for Global Entry, NEXUS, or TSA PreCheck®
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more