Foreign Transaction Fees

What is a foreign transaction fee?

A foreign transaction fee is a percentage your card issuer adds when you buy something in another currency, or from a merchant whose bank is outside the US.

Unlike most bank fees, this one is a percentage rather than a flat amount, so it scales with your spending. A trip where you spend $3,000 on a card charging 3% costs you $90 in fees.

How much does it cost?

Across the institutions in the Bank Fee Index, the median flat charge for using a card abroad is $1.25, with a range from $0.00 to $25.00, and 28 institutions charging nothing. Most cards charge a percentage instead, which these flat figures leave out.

Withdrawing cash abroad stacks charges: your bank's international ATM fee, the foreign transaction percentage that can apply on top of it, and the machine owner's own surcharge. Three charges, one withdrawal.

There is also a cost that never appears as a fee: the exchange rate. The card networks convert at their own published rate, which is usually close to the market rate. The problem is what happens when someone else offers to do the conversion for you.

Because the fee is a percentage, it is invisible in a way flat fees are not. It is folded into each transaction rather than appearing as a separate line, so a statement full of foreign purchases may show no fee line at all, only amounts slightly higher than you expected.

If you want the real figure, add up your foreign purchases for a trip and apply the percentage.

The offer to pay in dollars is a trap

At a terminal or an ATM abroad you will often be asked whether to be charged in local currency or in US dollars. Paying in dollars sounds safer and more predictable. It is neither.

Choosing dollars is called dynamic currency conversion, and it hands the exchange rate to the merchant or the machine operator rather than the card network. Their rate is often worse than the network rate, and your card's foreign transaction fee can still apply on top.

How to avoid or reduce this fee

1. 1Carry a card with no foreign transaction fee. Check the card's terms, because debit and credit cards from the same institution can differ.
2. 2Always pay in the local currency. Refuse the conversion offer at every terminal and every ATM.
3. 3Withdraw larger amounts less often. A flat ATM fee is the same regardless of size, so fewer withdrawals cost less.
4. 4Check your debit card separately from your credit card. Their foreign transaction terms can differ at the same institution.
5. 5Tell your bank you are traveling, or set a travel notice in the app, so a fraud check does not block your card abroad.
6. 6For a long trip, consider opening an account or card with no foreign transaction fee before you go.

Questions to ask before you travel

• Is the foreign transaction fee a percentage, a flat amount, or both?
• Does it apply to online purchases from overseas sellers that are charged in dollars?
• What do you charge for using an ATM abroad, on top of the percentage?
• Does my debit card carry the same terms as my credit card?
• Do you have partner banks abroad whose ATMs I can use without a surcharge?
• If a purchase abroad is refunded, do you refund the foreign transaction fee too?

What regulators say

There is no federal cap on foreign transaction fees. Card issuers set them as a business choice; no regulation sets a ceiling.

Dynamic currency conversion is governed by card network rules rather than federal regulation. Those rules require that you be offered a choice and shown the converted amount before you accept. Read the screen carefully, because dollars can be presented as the default.

For debit cards, Regulation E error resolution still applies abroad. If a foreign transaction is wrong or unauthorized, you have the same dispute rights you have at home, and the same deadlines for reporting it. 12 CFR 1005.11

For credit cards, the Fair Credit Billing Act lets you dispute a billing error in writing within 60 days of the statement that shows it, including a charge for something you never received. That right applies to purchases made abroad too. 12 CFR 1026.13

Compare your own bank

Find the foreign transaction line on both your debit card and your credit card terms. They are often different.

If you travel or buy from overseas sellers, check this fee before your next trip or order.