What is a foreign transaction fee?

Most travelers don’t realize they’re paying an extra fee on every international swipe or even some domestic online purchases. Here’s how foreign transaction fees work and how to make sure you never pay one again.

A foreign transaction fee is a charge added by credit card issuers when a purchase is processed outside the United States, typically 1%–3% of the transaction amount. The fee applies whether you are physically abroad or buying online from a foreign vendor. Most premium travel cards have eliminated this fee entirely.

TL;DR: Key takeaways

• What it is: A foreign transaction fee is a surcharge your card issuer adds to purchases processed outside the U.S., including many online orders from international retailers.
• Typical range: Most cards that charge this fee set it at 3% per transaction. Some issuers charge as low as 1%, while others waive it entirely. 
• Best move: Use a travel rewards card with no foreign transaction fee for all international spending to keep more of your rewards.
• Not worth it: Paying a 3% foreign transaction fee on a rewards card that earns 1%–2% cash back means you’re losing money on every swipe abroad.
• Rule of thumb: Before any trip, check your card’s rates-and-fees table (the Schumer Box) to confirm whether a foreign transaction fee applies.

When you use a credit card outside the United States — or purchase from a foreign merchant online — the transaction typically routes through an overseas bank for processing. Most card issuers pass that processing cost along to cardholders in the form of a foreign transaction fee.

The fee usually has two components: a network processing charge from Visa or Mastercard (typically around 1%) and an additional markup from your card issuer (often 1%–2%). Combined, the standard rate at most major U.S. banks is 3%. American Express has historically charged 2.7% on cards that carry the fee. Some issuers, however, absorb the network charge entirely and pass nothing along to cardholders.

One thing many travelers miss: you don’t have to be abroad to trigger this fee. Booking a hotel on a foreign airline’s website, purchasing from an international retailer online or even ordering from certain U.S.-based platforms that route transactions through overseas processors can all result in the charge showing up on your statement.

At checkout abroad, you may be prompted to pay in U.S. dollars rather than the local currency. This is called dynamic currency conversion (DCC), and while it might seem convenient, it typically costs more than simply paying in the local currency.

DCC allows the merchant (not your card network) to set the exchange rate, and those rates tend to be unfavorable. More importantly, choosing to pay in dollars through DCC does not guarantee you will avoid your card’s foreign transaction fee, since some issuers apply the fee based on where the transaction is processed rather than which currency was selected.

The same logic applies at ATMs abroad: if a machine offers to convert your withdrawal to U.S. dollars before dispensing cash, decline and proceed in local currency.

The most reliable way to sidestep foreign transaction fees is to carry at least one card that waives them entirely. Most premium travel rewards cards and a growing number of no-annual-fee cards have eliminated this fee as a baseline feature.

Here’s a simple checklist to run through before your next trip:

 

• Check your card’s Schumer Box. The rates-and-fees table issuers are legally required to provide will list the foreign transaction fee explicitly under the fees section. Look for it before you travel.
• Consider a card designed for travel. TPG’s list of best cards with no foreign transaction fees covers options across every spending style and annual fee tier.
• Bring a backup. Even with a no-fee card in hand, it’s worth confirming your card network (Visa, Mastercard, Amex or Discover) is widely accepted in the countries you plan to visit. Acceptance can vary, particularly at smaller merchants.
• Use a debit card with no international fees for ATM withdrawals. Some checking accounts waive foreign transaction fees and reimburse ATM surcharges globally, which is useful when cash is the only option.

 

For a list of TPG’s best credit cards with no foreign transaction fees, visit our page.