How to Avoid Foreign Transaction Fees on Your Credit Card

Foreign transaction fees can quickly add up when traveling abroad or making purchases in foreign currencies, costing you a significant amount over time. These fees typically range from 1% to 3% of the transaction amount and can be charged on top of exchange rate markups. Fortunately, there are several strategies you can use to avoid these fees and save money when using your credit card overseas.

1. Use a Credit Card Without Foreign Transaction Fees

The most straightforward way to avoid foreign transaction fees is to use a credit card that does not charge them. Many credit cards designed for travelers are specifically created to waive these fees, making them an ideal choice for international purchases. Some popular travel-focused credit cards include:

• Chase Sapphire Preferred® Card
• Capital One Venture Rewards Credit Card
• Citi Premier® Card
• American Express® Gold Card

When choosing a card, always verify that it waives foreign transaction fees, as not all travel cards offer this benefit.

2. Use a Travel Rewards Card

In addition to waiving foreign transaction fees, travel rewards cards often offer valuable points or miles for purchases made abroad. This can provide extra benefits when traveling, such as discounts on flights, hotels, and car rentals. Travel rewards cards tend to have competitive sign-up bonuses and enhanced earning potential for travel-related expenses. If you’re a frequent traveler, a travel rewards card can save you money while helping you earn rewards.

3. Use a Debit Card with No Foreign Transaction Fees

Some debit cards also waive foreign transaction fees, and using a debit card may be a good option for withdrawing cash or making purchases abroad. Look for a checking account or bank that offers fee-free international transactions. Examples of fee-free options include:

• Charles Schwab Bank High Yield Investor Checking account
• Capital One 360 Checking account

Additionally, some debit cards allow fee-free ATM withdrawals globally, which can help you save on cash-related fees.

4. Avoid Dynamic Currency Conversion (DCC)

When traveling abroad, you may be offered the option of paying in your home currency rather than the local currency at the point of sale. This service is known as Dynamic Currency Conversion (DCC). While it might seem convenient, DCC often comes with unfavorable exchange rates and additional fees, which can negate any savings from avoiding foreign transaction fees.

To avoid DCC:

• Decline DCC offers when they are presented.
• Always opt to pay in the local currency to get the best exchange rates.

5. Use a Multi-Currency Account or Prepaid Card

Some multi-currency accounts or prepaid cards allow you to hold and convert several currencies in advance, enabling you to make purchases abroad without incurring foreign transaction fees. These accounts can be useful for frequent international travelers or for those looking to lock in exchange rates before traveling.

Popular options include:

• Revolut (offers multi-currency accounts and card spending without foreign transaction fees)
• Wise (formerly TransferWise) Borderless Account (allows holding multiple currencies for international transactions)

By using these accounts, you can load local currency onto your card and avoid unnecessary transaction fees altogether.

6. Pay in Local Currency

When traveling internationally, always choose to pay in the local currency rather than your home currency. This ensures that the credit card issuer’s exchange rate is applied, which is typically better than the exchange rate offered through DCC. Paying in the local currency also helps you avoid hidden fees that merchants may add when converting the amount to your home currency.

7. Plan Ahead and Monitor Exchange Rates

Exchange rates can fluctuate, and knowing the right time to make purchases or withdraw cash while abroad can help you minimize the impact of foreign transaction fees. Some credit cards or services provide real-time exchange rate notifications, so you can keep an eye on favorable rates.

Additionally, consider using a service like Revolut or Wise, which allows you to monitor exchange rates and convert currency at better-than-average rates.

8. Pay Your Bill in Full

Even with a no-foreign-transaction-fee credit card, interest charges can accumulate quickly if you carry a balance. To avoid unnecessary fees and ensure you’re getting the best value out of your travel purchases, aim to pay your credit card bill in full each month. This way, you avoid interest charges and can continue enjoying the benefits of your card without paying more than necessary.

Final Thoughts

Foreign transaction fees can add up and significantly increase the cost of international travel or online purchases from foreign vendors. The best way to avoid these fees is to choose a credit card that waives foreign transaction fees, pay in the local currency, and carefully select how you manage your finances abroad. By planning ahead and using the right cards and strategies, you can save money and make your international spending more efficient.