Foreign Transaction Fees

You’ve purchased your plane tickets and the itinerary is all booked for your trip abroad. You’ve double checked your packing list so you don’t forget anything, but have you checked to see how much money you could end up paying in foreign transaction fees for purchases while traveling?

When traveling outside of the U.S., you could incur charges whenever you take out local currency from an ATM or pay with your debit or credit card at a business. Here’s what you need to know to budget accordingly, avoid as many of these fees as possible, and hold on to as much of your hard-earned cash as possible.

Fees to know about

There are three types of fees you may face using a debit or credit card overseas.

  • A foreign transaction fee, or currency conversion fee, typically ranges from 1 to 3 percent of the purchase amount. This fee itself is comprised of two separate fees: one from the payment network(s) and one from the card’s issuing financial institution.
  • An international ATM fee is a flat fee—usually $1 to $5—charged by a bank or credit union for using an ATM network in another country, plus a percentage—around 3 percent—of the amount you withdraw (called a foreign currency conversion fee). The fee may or may not be the same as the standard out-of-network ATM fee.
    • An additional ATM access fee may be charged by the owner of the foreign ATM. If there is such a fee, there should be a notice or alert so you can cancel the transaction and look for another ATM.
  • A dynamic currency conversion (DCC), or cardholder preferred currency (CPC), is an option offered by some merchants to have purchases translated into the buyer’s home currency at the store’s point of sale. If offered this service, politely decline. The DCC/CPC fees can be costly and are in addition to foreign transaction fees.

How to keep those fees low

It isn’t all bad news when traveling abroad and paying with a debit or credit card, though. Credit unions usually have lower international transaction fees and some banks waive certain fees if you withdraw money from partner bank ATMs. Before you leave the country, check the terms of your account and your credit cards to determine which carry the fewest fees. You can also ask about foreign ATM fee reimbursement, which some financial institutions offer.

Once you know what fees you can expect to pay, include them in your travel budget. Plan cash withdrawals at ATMs with low or no fees or those within your card’s network—you can find these on the back side of your card (look for the ATM network name and logo). Many credit cards also offer online ATM locators.

Alternatively, you could apply for a fee-free card before you leave for your trip and only use it while on vacation. In the end, not paying the multiple fees could save you more money than the cashback or other rewards offered by fee-charging credit cards.