How To Avoid Foreign Transaction Fees
The primary way to avoid foreign transaction fees is to obtain a credit card that does not charge FX fees and use it when traveling abroad or making purchases from foreign merchants, and there are plenty of great card options. As mentioned above, make sure you choose to pay in local currency instead of using dynamic currency conversion. You’ll generally get the best exchange rate this way and won’t be charged any extra fees.
What about ATM fees? It’s usually wise to have local cash on hand when traveling in a foreign country. However, you can incur both international transaction fees and out-of-network ATM fees when withdrawing cash outside the U.S. Make sure that you use an ATM card that reimburses ATM fees. You should also get a debit card that does not charge foreign transaction fees. Bank of America, for example, can charge a 3% foreign transaction fee when withdrawing cash. Some ATMs also try to hit you with DCC, so avoid that as well. This ensures you’ll receive the wholesale currency exchange rate that day.
It’s still best to use your credit card whenever possible, as long as it has the benefit of no foreign transaction fees. You’ll avoid paying extra and you’ll also enjoy the protections offered by your card issuer.
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At N26, all our accounts feature free card payments worldwide, as often as you like and with no foreign transaction fees. N26 You and Metal account holders can withdraw cash for free at foreign ATMs, while for Standard accounts, customers are charged a fixed 1.7% conversion fee on the withdrawal amount.
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Home Trust Preferred Visa*
Home Trust offers one of the only credit cards that has no foreign transaction fees whatsoever. Its a no-annual-fee card, plus you get a simple 1% cash back with no limits on how much you earn. Previously, there were no restrictions on where you can earn, but now you only receive cash back on domestic purchases. However, compared to other cards, the simplicity of Home Trust Preferred Visa is attractive.
As there are no annual fees, the card is pretty lean on extra coverage, but cardholders do receive roadside assistance at no additional charge.
- Annual fee:$0
Chase Sapphire Reserve: Best For Extra Travel Perks
- Rewards rate: 3X points on eligible travel and restaurant purchases 10X total points on Lyft purchases 1X points on all other purchases
- Welcome offer: 50,000 points after spending $4,000 on purchases within the first three months
- Annual fee: $550
The Chase Sapphire Reserve is one of the most popular travel credit cards around. With bonus points upon opening the card, a fee credit for Global Entry or TSA PreCheck and an annual $300 travel credit, this card offers a lot for travelers.
One of the biggest appeals is the Chase Ultimate Rewards portal, where cardholders can redeem points at a higher value for travel-related spending with travel partners. The annual fee is higher than many travel cards but it could be worth it if you travel frequently.
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Exchange Your Money Before Leaving
If you decide to go the cash route, exchanging your U.S. dollars for another currency before leaving the U.S. can be more convenient and less costly than doing it abroad and may cost less than foreign transaction fees.
When exchanging your money overseas, you could run into challenges, especially if you dont know the country very well. You could experience long wait times, difficulty finding a nearby currency exchange or face exorbitant fees when changing currencies.
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Is It Better To Use Cash Debit Cards Or Credit Cards Abroad
Many places have readily adopted credit cards and cashless payments, and a credit card can reduce how much cash you need to carry in case of theft. But there are countries whose businesses still conduct most of their transactions in cash. Travel around parts of Europe and you may find many restaurants and small businesses require a minimum amount before they’ll accept a credit card. That’s why it’s a good idea to have a debit card on hand as well.
Remember that exchanging money yourself is usually far more expensive and time-consuming than withdrawing the funds using a debit card. Many currency exchanges charge fees to exchange your dollars and give you a less favorable rate. When you use your debit card to withdraw the cash at a foreign ATM, you’ll get the bank’s wholesale rate — as long as you decline any currency conversions the ATM offers to make for you.
However, there may be international ATM fees you need to keep an eye on. Before you travel, ask your bank about what fees you’ll be charged on withdrawals.
How Much Should You Expect To Pay In Fees
The average international transaction fee will be around 3% for purchases made in US dollars. 1% of that fee may go to the payment processor, whether its Visa or MasterCard, and the other 2% might go to the bank that issued your credit card, such as Chase or Bank of America.
You might be thinking that 3% doesnt sound too bad, but these fees can quickly add up if youre making a lot of small purchases or youre making large purchases. For example, if you spend $100 and your fee is 3%, youll spend an extra $3, but if you spend $1,000, youll be paying an extra $30 in fees.
On top of that, most credit cards charge a 3-5% margin on the daily interbank or market exchange rate for the day. For many cards, this rate is at their sole discretion, and you may not know how big that margin is in advance.1 When combined with the fees, you could be paying at least a 6% premium on your purchase by using your credit card. Ouch.
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Chase Sapphire Reserve: Best Premium Travel Card
Annual fee: $550
Sign-up bonus: 50,000 points after you spend $4,000 on purchases in the first three months from account opening .
Bonus rewards: 10x on hotels, car rentals and Chase Dining purchases through the Ultimate Rewards portal, 5x on flights booked through the Ultimate Rewards portal, 3x points on all other travel and dining, 1x on everything else.
Why we like it: This premium travel rewards credit card became hugely popular when it was first released in 2016 and has remained one of the best travel credit cards for many TPG readers. As with the Chase Sapphire Preferred, youll find the most value by redeeming points through Chases transfer partners or through the Chase Ultimate Rewards portal. The Reserve boosts the value of these awards to 1.5 cents per point.
Other benefits include an annual $300 statement credit for travel and at least one year of DashPass membership , Lyft Pink membership, up to $100 credit for your Global Entry or TSA PreCheck application fee every four years and a Priority Pass Select membership that includes guest access.
Annual fee: $0
Sign-up bonus: $200 after you spend $500 on purchases in the first three months.
Bonus rewards: 3% cash back on dining, entertainment, popular streaming services and grocery stores 1% on everything else
Annual fee: $95
Sign-up bonus: $300 after you spend $3,000 on purchases in the first three months.
Types Of Transactions Subject To Fees
Any purchase made at a store, restaurant or other vendor outside the U.S. may be subject to a foreign transaction fee. Many establishments frequented by tourists will offer the option of being charged in your home currency. Be wary of this option, as the currency conversion rates are almost always worse than the rates you would get if you simply processed the charge in local currency. Even purchases denominated in your home currency, but made abroad, may be subject to foreign transaction fees. A good rule of thumb is to have the card charged in the local currency to avoid conversion fees and to choose a card that doesnt charge foreign transaction fees for all purchases made abroad.
Cash withdrawals from international ATMs are also subject to fees. In addition to ATM transaction fees, conversion fees may also be tacked on by the ATMs operator. These currency conversion fees are most likely to be encountered if a cardholder withdraws U.S. dollars from an international ATM.
Online purchases on an international shopping website may also incur foreign transaction fees, especially if the payment processor is an international bank or institution. This includes buying airline tickets from an international airline, even if the transaction is made in U.S. dollars.
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A1 Sending Money From The Us
A.1.1 The Country
Every transaction has a small fixed fee of about US$0.30, and the value of this fee can change depending on the currency in which it is paid.
A.1.2 Payment Method
Using your PayPal balance or a linked bank account will often be free.
If the money being sent is funded with a debit card, credit card or PayPal credit, then an additional fee of 2.9% of the amount involved is charged.
A.1.3 Amount Involved
Transactions with amounts that are below $50 are charged $0.99 if the payment is to Europe, Canada and many other countries.
If the amount being sent is between $50 and$100, the fee charged for the same countries is $2.99.
The same fee applies for amounts exceeding $100, but when sent only to Canada or Europe.
A payment exceeding $100 to other countries attracts a fee of $4.99.
This table is an excerpt from PayPal.
For example, if you are sending $100 to Canada or Europe, you will pay a total fee of about $3.29 if it is funded with your PayPal balance.
Total Fee = 30c + $2.99 = $3.29 USD
However, the fee is about $6.19 if the money is from your debit or credit card balance.
A.1.4 Currency Exchange Fees
If the recipient can use US dollars, there are no additional fees. However, chances are the recipient may need those funds in their local currency.
You can do this before you send the funds or they will have to do it when it arrives .
A.1.5 How to Save on Fees
Tips And Tricks For Using Atms And Paying By Card Abroad
Using your card as you travel can be convenient and as long as you avoid high fees, such as those associated with DCC, you can also get a good deal on your overseas spending. Here are a few tips to make sure you make the most of your money while abroad.
If youre planning on paying for your trip abroad using your credit or debit card, Citibank have a few credit or debit cards which can help you get a better deal on your spending. It helps to understand the terms of your specific card before you travel, so you dont get any nasty surprises but by choosing the right card, and following our tips, you can get a good deal on your day to day spending when travelling.
All sources last checked 12 March 2019
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Do I Really Need A Credit Card With 0% Foreign Transaction Fees
This largely depends on how often you travel abroad and how much you spend. For example, spending $5,000 annually abroad will cost you $150 in foreign transaction fees. Getting a no-annual-fee card with no foreign transaction fees can save you that money.
That said, spending $500 with your card abroad will only cost you $15. Sometimes, trying to avoid a $15 fee may not be worth the hassle of getting another card.
Should I use my international credit card to withdraw cash from international ATMs?
Not only should you avoid withdrawing cash with your credit card from international ATMs, but you should avoid doing so at any ATM, period. Youll be hit with a cash advance fee, and your transaction will immediately start accruing interest. The local ATM provider may even charge you a withdrawal fee.
One of the best options to withdraw cash abroad is using a debit card specifically one that waives all ATM fees and gives you the true exchange rate. Consider a service like the Charles Schwab High Yield Investor Checking account, which comes highly recommended by Finder staff.
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What About Foreign Atm Fees
Many banks still charge foreign transaction fees for withdrawing cash at foreign ATMs, even if foreign credit card purchase transactions can occur fee-free. Some banks waive certain fees if you withdraw money from partner bank ATMs.
For example, Bank of America generally charges a 3% fee to withdraw cash from a foreign ATM. However, if you use an ATM at one of the companys Global Alliance Partners, which includes Barclays, Deutsche Bank, China Construction Bank and six others, the fee is waived, according to the Bank of America website.
Overall, ATM foreign transaction fees can vary depending on the issuer, the card and how you use it. Travelers who withdraw cash from ATMs in the local currency may incur several fees:
- A flat-rate international ATM surcharge charged by your bank when using an ATM not affiliated with your bank, usually $5, but it may vary
- A foreign currency conversion fee charged by your bank, typically a percentage of the withdrawal amount, usually 3%
- An additional ATM access fee charged by the owner of the foreign ATM you are using
Its different if you have a bank that has international branches or if you have a level of deposit where they dont charge fees, Fillet said. But I think its difficult to avoid ATM fees in a foreign country.
As a result, its probably best to avoid using cash and pay with a credit card especially if its fee-free instead.
Foreign Transaction Fees By Credit Card Issuer
Foreign transaction fees vary by card issuer. This rate can even vary between card products from the same issuer. The table below provides both the typical FX fee by issuer, plus a selection of the cards without FX fees offered by that bank. Every major bank offers at least one card without foreign transaction fees.
|Up to 3%||
Capital One is unique in that it doesn’t levy foreign transaction fees on any of its card products.
As far as the other issuers go, the foreign transaction fee is typically around 3%, when levied. Still, there are plenty of cards that don’ft assess international transaction fees, so you should be able to easily avoid them.
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Get A Checking Account Or Debit Card With No Foreign Transaction Fees
Combining a debit card without international fees with a similar credit card makes a great wallet for a frequent traveler. Even on its own, a debit card that doesnt charge foreign transaction fees is useful for making everyday purchases and withdrawing money from ATMs.
A popular option for travelers is the High Yield Investor Checking account from Charles Schwab. Schwab debit cardholders have zero foreign transaction fees and receive ATM fee rebates at the end of each month.
Although using a debit card can be convenient, debit cards offer less protection against fraud than credit cards. If debit card information is stolen, it can take much longer to receive stolen funds from the issuing bank and some account holders may see their luck run out entirely. For those travelling on a budget or who have limited available capital, this can pose significant dangers while abroad. Always report fraud right away and follow any steps the bank may require to receive funds back as quickly as possible.
How To Compare Credit Cards For Overseas Travel
With certain credit cards on the market specifically designed for overseas use, there are some important features you should compare to find the right one for you.
Annual Percentage Rate
However, APR doesnt take into account other fees, such as those you may or may not be charged when you travel abroad. A 0% foreign fees credit card may have a higher APR than other types of credit cards, but it will save you quite a lot in fees if you travel often and dont carry a balance on the card. So, while a handy figure to compare the cost of borrowing with different cards, the APR doesnt tell the whole story.
Finally, always keep in mind that credit card companies only have to offer their advertised representative APR to 51% of the people who are approved for the card .
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