What you should know about foreign transaction fees

Getting ready to travel abroad? There’s a lot to take care of before you leave. Plane tickets? Already bought. Travel insurance? Got it. Budgeting for foreign transaction and currency conversion fees on your trip? Wait, what?

It’s true. Some credit cards, debit cards and prepaid cards have extra fees if you buy something abroad or online through a foreign merchant. Keep reading to learn about foreign transaction fees—and how you might be able to avoid them.

What you’ll learn:

• A foreign transaction fee is a surcharge for purchases made outside of the U.S. with a credit card.

• Foreign transaction fees might also apply to debit card and prepaid card transactions.

• Foreign transaction fees vary depending on the card issuer, card network and type of card, but they often range from 1% to 3% of the transaction.

• Some credit card issuers, including Capital One, don’t charge foreign transaction fees. View important rates and disclosures.

Foreign transaction fees are charges that some credit card issuers add to transactions made outside the U.S. or with foreign merchants. They can apply to purchases, withdrawals and more. 

The fee can be made up of smaller charges by the credit card network as well as the credit card issuer. And according to Bankrate, they might range from 1% to 3% of the purchase price.

But not all credit card issuers charge foreign transaction fees. So if you’re traveling abroad, one way to avoid these fees is to use a card that doesn’t penalize you for international purchases.

Say you buy a new camera while out shopping in Tokyo. If you pay with a credit card from an issuer that charges foreign transaction fees, it might cost more than what the price tag says. 

But that’s not the only time you might encounter these foreign transaction fees. Depending on your issuer, the fee can also be tacked on to your online transactions with merchants based outside of the U.S. 

But some card issuers don’t charge foreign transaction fees. Capital One is an example. View important rates and disclosures. 

If your issuer does, fees may be in the area of 1% to 3% of your purchase. It might not seem like much, but it can really add up over the course of a long trip. That’s why it’s important to check your card’s terms and conditions to see how your issuer handles charges made outside the U.S.

The cost of foreign transaction fees can vary from one card to another. But they typically range from 1% to 3% of each transaction. Understanding your card’s foreign transaction fees could help you budget your travel costs. This is important because using your card to make frequent smaller purchases—or a large international purchase—could add up quickly.

Generally, the foreign transaction fee is a percentage of the total purchase. So, you’ll need to find out the percentage a card charges and multiply that by your total purchase. 

Say you purchase a meal for $50. And your issuer charges a 3% foreign transaction. Here’s how to determine how much the foreign transaction fee will cost:

1. Convert the percentage to a decimal. You can do that by moving the decimal two places to the left. Three percent (3%) is .03 in decimal form.

2. Multiply the amount of your transaction by the decimal from Step 1 to find the foreign transaction fee amount. In this case, multiplying $50 by .03 gives you $1.50.

3. To figure out the total cost, you can add the foreign transaction fee to the purchase price. Adding $50 and $1.50 means you would pay $51.50 for the meal.

Currency conversion fees can be included in foreign transaction fees, but there’s a slight technical difference. With foreign transaction fees, the card issuer charges a fee for purchases made abroad or online from foreign merchants. A currency conversion fee is charged by the card’s payment network or ATM network for converting one currency to another.

Capital One doesn’t charge a currency conversion fee, but other issuers might. View important rates and disclosures.

Not all card issuers charge foreign transaction fees. In general, foreign transaction fees can vary by card issuer and the type of credit card. Debit cards or prepaid travel cards could also have foreign transaction fees. That’s why it’s a good idea to review your card’s terms and conditions. You can also learn more about credit cards that don’t charge foreign transaction fees. 

Don’t let foreign transaction fees rain on your travel parade. There are several options to explore when it comes to avoiding these types of fees.

Some travel rewards credit cards are designed with international travel in mind. They may have additional benefits too, such as rewards miles. While some travel rewards credit cards charge an annual fee, the perks can make it worthwhile. 

For example, Capital One’s travel and miles rewards credit cards allow you to earn unlimited miles per dollar on every purchase you make and even more rewards for travel-related bookings. Plus you’ll get access to Capital One Travel. 

Check out some popular Capital One cards for international travel:

• Capital One Venture X: This card lets cardholders earn double miles on every purchase and even more on every trip. It has an annual fee, but it doesn’t charge foreign transaction fees. View important rates and disclosures. In addition to unlimited rewards, Venture X also offers an early spend bonus, an anniversary bonus, an annual travel credit and more. 

• Venture Rewards from Capital One: Like Venture X, this card has an annual fee but lets you earn unlimited miles on purchases and additional rewards on travel purchases—without foreign transaction charges. View important rates and disclosures.

• VentureOne Rewards from Capital One: Geared toward those with an excellent credit profile, this travel card offers unlimited rewards on both travel and non-travel purchases without an annual fee or foreign transaction fees. View important rates and disclosures.

• VentureOne Rewards for Good Credit from Capital One: This card offers similar benefits to the VentureOne rewards card, like travel rewards and no foreign transaction charges, and is geared toward individuals with a good credit score. View important rates and disclosures.

Using your debit card to withdraw cash while abroad could be a way to avoid foreign transaction fees if your card doesn’t charge them. But some accounts might have international ATM fees. Separate ATM fees are something to look out for too.  

Before you leave the country, you might want to check whether your current card charges these fees. If so, you may want to find out if there’s a branch location or partner bank where you’re headed. You might be able to make free cash withdrawals from those locations.

Having local currency on hand can be a convenient way to avoid foreign transaction fees if you don’t mind carrying cash. But remember, there could be other fees for using a foreign ATM. Currency exchanges may be available at the airport. But those might charge higher conversion rates than your bank or credit card. 

So consider researching the exchange rate and exchanging currencies before you start traveling, especially if you’re unfamiliar with the country you’re traveling to.

Foreign transaction fees don’t have to put a dent in your travel plans. These fees can add up quickly, but there are some steps you could take to possibly avoid them. Using local currency is one option. You could also consider applying for a credit card that doesn’t charge fees for foreign transactions. 

If you’re a frequent traveler, you might consider Capital One’s Venture X card. It has no foreign transaction fees and comes with plenty of other elevated travel rewards designed to take you further. View important rates and disclosures.

Who wouldn’t want to get the most out of their credit card? Here are some things to know about Capital One travel rewards credit cards: 

• Get a one-time 75,000-mile bonus with the Capital One Venture X card and receive an additional 10,000 bonus miles every year, starting on your first anniversary. (View important rates and disclosures.)

• Earn unlimited 2X miles and 75,000 bonus miles with the Capital One Venture card. (View important rates and disclosures.)

• Earn unlimited 1.25X miles with no annual fee with the Venture One card from Capital One. (View important rates and disclosures.) 

• Explore travel rewards card options by comparing Capital One Venture cards. 

• Learn how Venture X cardholders can get access to a worldwide network of airport lounges thanks to a complimentary Priority Pass membership.