Foreign Transaction Fees: What Are They and How to Avoid Them

Key takeaways

• Foreign transaction fees typically range from 1% to 3% of a purchase when you use a credit or debit card outside the U.S. or with international merchants.¹

• These fees can apply when you travel abroad or shop online from foreign websites.

• You can avoid them by using a card that doesn't charge foreign transaction fees, such as the Chime Visa^®  Debit Card.

• Pro tip: Pay in the local currency at checkout to skip dynamic currency conversion markups.

If you're planning a trip abroad or shopping on international websites, foreign transaction fees can quietly add up. These charges typically range from 1% to 3% of every purchase – and they apply whether you're swiping your card at a café in Paris or buying sneakers from an overseas retailer online. The good news? You can take steps to avoid them and keep more money in your pocket.

What is a foreign transaction fee?

A foreign transaction fee is a charge that credit card companies and some debit card issuers add when you make a purchase outside the United States or with a merchant based in another country. This fee typically ranges from 1% to 3% of the transaction amount. Even if you don't leave home, you could face this fee when buying from international websites.

When you use an ATM abroad, you may encounter additional usage surcharges on top of the foreign transaction fee. These costs can vary by country and ATM operator. It's worth checking your card's fee schedule before you travel.

Online purchases from foreign retailers can trigger foreign transaction fees without leaving home. If the merchant processes the transaction in a foreign currency, your card issuer may apply the fee. This catches many shoppers off guard when they buy from international e-commerce sites.

How foreign transaction fees work

Foreign transaction fees come from two sources when you make an international purchase. Here's how the fee breaks down:

• Network fee: Card networks like Visa^® and Mastercard^® typically charge around 1% for processing international transactions.

• Issuer fee: Your card issuer often adds its own charge, typically 1% to 2%, on top of the network fee.

These fees help cover the costs that financial institutions incur when settling transactions across borders. The combined total often lands between 2% and 3% of your purchase.² Currency conversion happens automatically during this process.

How to calculate a foreign transaction fee

Calculating a foreign transaction fee is straightforward once you know your card's rate. Multiply your purchase amount by the fee percentage to find the extra cost.

For example, if you make a $1,000 purchase with a card that charges a 3% foreign transaction fee, you'd pay an extra $30. The math works like this: $1,000 x 0.03 = $30. Your total cost becomes $1,030.

How to find foreign transaction fees

Before you travel or shop internationally, check whether your card charges foreign transaction fees. Here's where to look:

• Cardholder agreement: This document outlines all fees associated with your card, including foreign transaction fees.

• Issuer's website: Look for the terms and conditions page or fee schedule section for your specific card.

If you can't find the information online, call your card issuer's customer service line. They can tell you exactly what fees apply to international transactions.

How to avoid foreign transaction fees

You don't have to accept foreign transaction fees as an unavoidable travel expense. Here are strategies that can help you keep more of your money:

• Choose a card that doesn't charge them: Some cards waive foreign transaction fees entirely. The Chime Visa^®  Debit Card and Chime Card^™ don't charge foreign transaction fees, which can save you money when traveling or shopping internationally.

• Pay with cash or local currency: Withdrawing cash from a checking account or a savings account and paying in local currency can help you avoid card-based fees. Keep in mind you may still face an ATM withdrawal fee, and this approach won't work for online purchases.

• Use fee-free ATMs: When you need cash abroad, look for ATMs in networks that don't charge foreign ATM fees. This can reduce the total cost of getting local currency.

Choose local currency when paying abroad

When you pay with a card abroad, merchants sometimes offer to charge you in U.S. dollars instead of the local currency. This is called dynamic currency conversion. While it might seem convenient, it often includes a markup on top of a less favorable exchange rate.

Paying in the local currency typically gives you a better deal. Your card network handles the conversion at a competitive exchange rate. You'll still face a foreign transaction fee if your card charges one, but you'll avoid the extra dynamic currency conversion markup.

Do debit cards charge foreign transaction fees?

Many debit cards do charge foreign transaction fees, often in the same 1% to 3% range as credit cards. Traditional financial institutions frequently apply these fees to international debit card transactions. However, some financial institutions skip them.

Mobile-first accounts increasingly waive foreign transaction fees as a competitive feature. Chime^®  does not charge foreign transaction fees on the Chime Visa^®  Debit Card, which can make it a practical option for international travel.

Before you travel, confirm your debit card's policy with your financial institution. Fee structures vary, and knowing what to expect can help you budget accurately for your trip.

Credit cards with no foreign transaction fees

When comparing credit cards with no foreign transaction fees, consider these factors:

• Rewards programs: Some cards offer cash back, points, or miles on purchases.

• Annual fees: Cards with no annual fee can save you money if you don't need premium perks.

• Annual percentage rates: If you carry a balance, a lower APR can reduce interest costs.

• Sign-up bonuses: Some cards offer bonus rewards after you meet an initial spending threshold.

Foreign transaction fees don't have to dampen your travel plans

Foreign transaction fees can add up, but they don't have to derail your budget. By choosing cards that don't charge these fees and paying in local currency when possible, you can explore the world without unnecessary costs eating into your travel fund.