What to know and how to avoid them – Forbes Advisor
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Many international travelers face foreign transaction fees when making purchases or withdrawing money from an ATM in a foreign country. The easiest way to avoid overseas transaction fees is to use a debit or credit card that waives these fees when traveling overseas. Fortunately, there are many credit and debit card options that offer this benefit to those crossing borders.
What are the foreign transaction fees?
Foreign transaction fees are fees charged by a credit card issuer or bank for each transaction made in a country outside of the United States. The fees vary depending on the terms and conditions of the credit card or bank, but are usually between 1% and 5%. Always check the terms of a card before you assume anything, especially when it comes to fees.
Payment processing networks such as Visa, Discover, Mastercard, and American Express may also charge international fees. Card issuers can choose to exclude these fees from the terms of the card, but otherwise the network fees will be added to the fees charged by the issuer.
Foreign transaction fees usually appear as a separate charge on your billing statement.
Types of transactions subject to fees
Any purchase made at a store, restaurant, or other vendor outside of the United States may be subject to foreign transaction fees. Many establishments frequented by tourists offer the option of being billed in the currency of your country. Beware of this option, as currency conversion rates are almost always worse than what you would get if you had just processed the fees in the local currency. Even purchases denominated in your national currency, but made abroad, may be subject to foreign transaction fees. A good rule of thumb is to charge the card in the local currency to avoid conversion fees, and to choose a card that does not charge a foreign transaction fee for all purchases made abroad.
Cash withdrawals from international ATMs are also subject to fees. In addition to the ATM transaction fee, a conversion fee may also be added by the ATM operator. These currency conversion fees are more likely to be encountered if a cardholder withdraws US dollars from an international ATM.
Online shopping on an international shopping website may also incur foreign transaction fees, especially if the payment processor is a bank or an international institution. This includes purchasing airline tickets from an international airline, even if the transaction is made in US dollars.
How to Avoid Foreign Transaction Fees
Fortunately, there are several options for avoiding overseas transaction fees. Many banks offer credit cards with no overseas transaction fees, and a number of institutions offer checking accounts that do not charge overseas transaction fees for overseas cash withdrawals. New debit or credit card applications can sometimes take up to a week to be approved and waiting for a new card to be delivered in the mail can take up to two weeks, so you should consider these options well in advance of your business. next big trip.
Get a credit card with no foreign transaction fees
Many credit cards offer cardholders the option of swiping without incurring foreign transaction fees. These cards present the easiest and most secure strategy for making purchases abroad.
Credit cards with no overseas transaction fees are useful both abroad and at home when shopping online from an international website. Many cards even offer rewards that can be used for future trips or help cover the cost of daily purchases.
Perhaps the biggest advantage of using a credit card with no overseas transaction fees while traveling is that, even if credit card information is copied or stolen, it’s relatively easy to report. fraud and quickly recover stolen funds from a credit card issuer.
One of the most popular travel rewards cards is the Chase Sapphire Preferred® Card. Sapphire Preferred does not charge any overseas transaction fees and offers the following rewards: earn 5 points per dollar on travel purchased through Chase Ultimate Rewards®, 3 points per dollar on meals, and 2 points per dollar on all other travel purchases and one point per dollar on all other eligible purchases. Plus, until March 2022, you’ll earn a total of 5 points per dollar on Lyft rides. Points can be redeemed for flights, restaurants, hotels and more.
Get a checking account or debit card with no foreign transaction fees
Combining an international no-fee debit card with a similar credit card makes a great wallet for a frequent traveler. Even on its own, a debit card that doesn’t charge an overseas transaction fee is useful for making daily purchases and withdrawing money from ATMs.
A popular option for travelers is the Charles Schwab High Yield Investor Checking Account. Schwab debit cardholders have no overseas transaction fees and receive rebates on ATM fees at the end of each month.
While using a debit card can be convenient, debit cards offer less protection against fraud than credit cards. If the debit card information is stolen, it may take much longer to receive the stolen funds from the issuing bank and some account holders may have their luck run out completely. For those traveling on a budget or who have limited available capital, this can present significant dangers abroad. Always report fraud immediately and follow any steps the bank may require to receive the funds as quickly as possible.
Do not use international ATMs without first checking the charges
Regardless of the type of credit or debit card on hand, travelers should check the charges before using an international ATM. The fees to be considered include the fees of the international ATM, the fees for currency conversion and the fees of the originating bank. These fees can be avoided by choosing a bank account that does not charge fees and reimburses fees for off-grid ATMs and always withdrawing local currency from ATMs. Account holders can also ask their home bank if there are any partner branches or networked ATMs in the destination country (s).
Travelers who don’t have a fee-reimbursing account may want to consider making fewer trips to the ATM and withdrawing more money each time to minimize fees. Of course, carrying more cash also comes with risk.
Exchange money before leaving the United States
One way to avoid ATM or transaction fees is to pay for travel in cash. Travelers can exchange US dollars for most major currencies at a bank, credit union, or bureau de change before a big trip. This can be a good idea if it is easy to budget how much will be spent on meals or souvenir shopping. Banks and credit unions generally have the lowest exchange rates or fees compared to exchanging money at an airport on arrival. We recommend that you exchange currency as far away from an airport as possible.
Be aware of the risk of carrying a large amount of cash on a trip. There is a greater chance of losing the money or having it stolen. Be extremely careful when choosing this option and make sure you have a backup option, such as a backup credit card, so that you don’t find yourself without a way to purchase food or transport tickets.
Foreign transaction fees can be safely avoided with the right credit or debit card in your wallet. Apply for a credit card or checking account that offers no transaction fees and / or discounts at an ATM well in advance of your trip to ensure there is sufficient time to receive credit card approval or account and get a new credit or debit card in the mail.
If applying for a no-charge card isn’t an option, consider exchanging enough money for travel at a bank or credit union before you leave the United States. However, this strategy can be risky, so be sure to think about the best way to protect yourself and your money when traveling abroad.
As long as a plan is in place well in advance, any traveler can avoid transaction fees abroad.