Credit card fitness

    Foreign Transaction Fee: Costs of Using Your Credit Card Abroad

22 May, 2024

When traveling internationally or making purchases from foreign merchants, you may encounter foreign transaction fees on your credit card. Understanding these fees and how to avoid them can help you save money and make more informed financial decisions.

What is a Foreign Transaction Fee?

A foreign transaction fee is a surcharge imposed by your credit card issuer on purchases made in a foreign currency or processed by a foreign bank. These fees typically range from 1% to 3% of the transaction amount and can quickly add up if you frequently travel or shop internationally.

How Foreign Transaction Fees Work

Foreign transaction fees are usually composed of two parts:

  • Network Fee: A fee charged by the payment network (e.g., Visa, MasterCard) for converting the foreign currency to your home currency.
  • Issuer Fee: An additional fee imposed by your credit card issuer for processing the international transaction.

Impact of Foreign Transaction Fees

Foreign transaction fees can significantly increase the cost of international purchases. For example, a 3% fee on a $1,000 purchase adds an additional $30 to your expense. These fees apply to a wide range of transactions, including:

  • Purchases Abroad: Buying goods and services while traveling in another country.
  • Online Purchases: Shopping from international websites.
  • ATM Withdrawals: Withdrawing cash from ATMs outside your home country.

Avoiding Foreign Transaction Fees

To avoid foreign transaction fees, consider the following strategies:

  • Use a No-Fee Credit Card: Many credit cards offer no foreign transaction fees, making them ideal for international travel and purchases. Research and apply for a card that suits your needs.
  • Pay in Local Currency: When given the option, choose to pay in the local currency instead of your home currency. Dynamic currency conversion can result in higher costs due to unfavorable exchange rates and additional fees.
  • Plan Ahead: Before traveling, notify your credit card issuer to avoid potential issues with international transactions and confirm the fees associated with your card.
  • Carry Multiple Payment Options: Have a backup credit card or other payment methods in case your primary card incurs high fees or is not accepted.


Foreign transaction fees can add significant costs to your international spending. By understanding these fees and using strategies to avoid them, such as choosing a no-fee credit card and paying in the local currency, you can save money and enjoy a more cost-effective travel experience. Planning ahead and being aware of your card’s terms can help you manage your finances more effectively while abroad.