What You Don’t Know About Foreign Transaction Fees
According to a survey by personal finance website WalletHub, more than half of credit card holders don’t know if their credit card charges an overseas transaction fee. And that can be one costly mistake.
Overseas transaction fees are charged by your card issuer – such as Chase or Wells Fargo – for every purchase made outside the United States, or for domestic purchases made through companies located outside of the United States (for example, if you book a hotel room in London via a hotel website, rather than something like Expedia or Kayak, you will most likely pay overseas transaction fees.) These are usually around three percent for each move.
So, if you, say, went on a week’s vacation to Europe and spent $ 1000 on your credit card, you would have to pay an extra $ 30. Spend a little more and it can cost more than an annual fee or overshadow cashback and other rewards. (In addition, you are likely to pay a conversion fee if you withdraw cash from an ATM.)
A separate report from CompareCards.com, also released on Tuesday, found that nearly half of all cards charge fees (WalletHub found that 72% charge fees). While both banks and credit unions charge fees for overseas transactions, banking fees are generally higher: while credit unions charge an average of 1.15 percent, bank-issued credit cards are charged a 2.97 percent fee. To find out if your card has one, see the “Commission” section in the terms of use of your card.
Avoiding Foreign Transaction Fees
Many cards that do not charge overseas transaction fees have an annual fee. “On average, cards included in our study charge an annual fee of $ 86.76 per annum with no foreign transaction fees, compared to $ 14.99 per year for cards that estimate foreign transaction fees,” reports CompareCards … However, if you spend a decent amount on your trip, you can easily cancel the fee with your savings, as well as other perks these cards typically offer, such as travel cancellation insurance, baggage loss insurance, lounge access, and international entry. …
However, there is no shortage of cards that charge no annual fees or overseas transaction fees. CompareCards found that 27 cards did not charge any fees, including Chase Amazon Prime cards and all Discover and Capital One cards.
Another thing to keep in mind is that your card’s payment processor (like Visa) also charges a currency conversion fee. Visa and MasterCard charge one percent on every dollar you spend (depending on which country you are in). NerdWallet notes that these fees are often not listed separately on your statement as fees for foreign transactions, and not every bank passes them on to you, the consumer.
“It is not always clear from disclosing your credit card information how much the currency conversion fee will cost you,” writes NerdWallet. “Many consumers find that they have to compare the totals on their receipts with the transaction costs shown on their statements, or contact their card issuers to find out how much they are charged.”
If you are charged a conversion fee of more than one percent, buy a better card. You can also check with your issuer which currency conversion rate they are using before traveling to better understand how much you will be charged. However, WalletHub notes that using a credit card will likely give you a better conversion rate – converting at a foreign bank or airport is likely to be more expensive. And using a credit card will still be safer than stuffing a suitcase with cash.