Foreign transaction fee: What is it and how does it work?

5 minute read

A foreign transaction fee is an extra charge added by some card providers, if you use your credit or debit card overseas or buy something online from a retailer based abroad. Not all cards apply a foreign transaction fee, so it’s well worth checking out the terms of your card — or even getting an alternative, fee free card for spending while you’re on the move. This can mean you spend less on fees, and have more to spend on yourself.

Read on for more on foreign transaction fees, where and why you might find them — and how to avoid paying more than you have to while you’re overseas.

When am I charged a foreign transaction fee?

Depending on the terms of your credit or debit card, you may be charged a foreign transaction fee if you make a purchase with your card outside of the US, or with a retailer which then routes the payment through a non-US bank. This means that you can encounter foreign transaction fees not only when you’re traveling, but also when shopping here in the US.

The most common place to find foreign transaction fees locally is when shopping online. It can be tricky to be sure if an online retailer you’re using is based abroad, or if they route their payments via an overseas bank. Check the site’s ‘contact’ and ‘about’ pages to see if the location of the business is listed — if you’re not sure, you might want to get in touch with the seller, to double check.

Not all credit and debit cards charge a foreign transaction fee. However, if yours does, you can expect to pay an extra 1-3% of the transaction value each time you use your card for an international purchase.¹

Foreign transaction fees can quickly mount up. That’s why many people choose to get a credit or debit card with fee free foreign purchases — especially for online shopping and vacation travel. If your regular card adds a foreign transaction fee, you might consider a modern solution, like the borderless account from Wise.

You can hold money in over 40 currencies in the borderless multi-currency account and conveniently spend any currency you hold, by applying for a linked debit card. You’ll also be able to get local bank details to receive payments in major currencies for free, and you can switch to and from dollars easily, using the mid-market rate, whenever you want to. The service is convenient, safe and there are no markups or hidden fees to worry about.

How do I know I've been charged a foreign transaction fee?

Foreign transaction fees will be shown on your credit or debit card statement, often as a separate line to the purchase you made. The charge will be made on the day the payment is processed — which may be a day or two later than the actual transaction.

Of course, you don’t need to wait until after you’ve been charged, to understand the lay of the land. You can also check your card terms and conditions in advance, to see whether or not a foreign transaction fee will be added to your international purchases.

What other charges should I know about?

If you’re spending with overseas retailers and using your credit or debit card, there are a few other fees you need to consider.

Exchange rate markups

The exchange rate applied by your card issuer will make a big difference to what you ultimately pay. Typically Visa and Mastercard exchange rates are comparable to the rates available elsewhere on the open market, as long as you can avoid dynamic currency conversion (DCC) — more on that in a moment.

The best benchmark to use when reviewing the exchange rate your card will offer, is the mid-market rate. This is the rate banks use when they trade currency on global markets, but it’s often not passed on to retail customers. Instead, a markup or margin is added by banks and currency exchange services. This can mean you pay more than you expect. Check out the exchange rates used by your bank, before you travel, to make sure there are no surprises. Or choose an alternative like the Wise borderless account, to convert your dollars to the currency of your choice using the mid-market rate. You can also join the waitlist for a linked debit card, to spend fee free while you travel.

International ATM withdrawal fees

Some debit and credit cards will charge if you choose to withdraw local cash from an ATM while you’re overseas. It pays to check your card conditions before you travel — and ask your local branch if your bank has partner institutions abroad or is part of an ATM network like the Global Alliance. You might find that you can get fee free, or reduced cost ATM withdrawals by using your home bank’s partner institutions abroad.

Credit card cash advance fees

Don’t forget that using your credit card in an ATM at home or abroad can mean you pay extra fees. In many cases there is a cash advance fee to pay and extra costs for currency conversion if you’re overseas. You may also start to incur interest charges on your withdrawal immediately, even if regular purchases have a grace period.

Avoid extra fees abroad

How to avoid extra fees when you're abroad

Don’t pay more than you have to when traveling. Here are a few great tips, which could save you money on charges and fees.

Dynamic Currency Conversion: choose local currency

You may be offered dynamic currency conversion — known as DCC — any time you use a credit, debit or prepaid card abroad. You’ll be asked by a merchant or via an on-screen message at an ATM, if you’d prefer to pay for your purchase in dollars instead of the local currency. Although paying in dollars sounds convenient, it can ultimately cost more because the exchange rate used may not be the best available. To get the best deal choose to pay in the local currency instead.

Pay with cash

It’s always a smart idea to have more than one way to pay for your travels when you’re abroad. Using your card might be convenient, but having a stock of local currency is also a great way to avoid foreign transaction fees and can be handy if you find yourself in an area where card acceptance is limited. Avoid hotel and airport currency exchange booths which often have poor exchange rates, to make your dollars go further.

Use a no-fee debit card

Not all credit and debit cards charge foreign transaction fees. If you have several different cards, it’s worth checking the fee schedule for each, to make sure you use the right one for overseas purchases. Or alternatively, you might want to get yourself a new borderless account and the multi-currency debit card, for fee free spending in over 40 currencies.

Don't use your credit card at ATMs

Finally, it’s usually a good idea to avoid using your credit card when you need to withdraw cash from an ATM. This is often expensive with cash advance fees and interest to pay immediately.

Foreign transaction fees can come as a surprise — especially if you get caught out and find you need to pay them for online purchases made here in the US. It’s always smart to check out the terms of your card before you travel or shop with retailers based overseas, to make sure you’re getting the best possible deal. And if you’re looking for great value currency exchange, planning on sending or receiving payments from abroad or want a convenient way to manage your money as you travel check out the Wise borderless account, to see if you can save.


  1. 8 April 2019

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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