Foreign transaction fees: A definition

Traveling abroad? There’s a lot to budget for, from meals and souvenirs to travel insurance and baggage fees. One additional expense to consider is foreign transaction fees.

Some credit card, debit card and prepaid card issuers add a charge when you buy something abroad or 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 with a credit card outside the U.S.

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

• Foreign transaction fee charges 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.

A foreign transaction fee is a charge that some credit card issuers add to transactions made outside the U.S. or with foreign merchants online.

Foreign transaction fees are charged by the card issuer for using the card abroad or with foreign merchants. Currency conversion fees are charged by the credit card payment network for converting one currency to another. Both fees may also be combined and referred to together as a foreign transaction fee.

Capital One doesn’t charge foreign transaction or currency conversion fees, but other issuers might. View important rates and disclosures.

Foreign transaction fees are calculated as a percentage of the total price of your purchase. If you pay with a credit card from an issuer that charges foreign transaction fees, here are a couple of situations where you might come across them: 

• Using your card in a foreign country: Whether it’s for a quick bite from a sandwich shop or a designer leather bag, using your credit card on overseas purchases may incur a foreign transaction fee. 

• Making purchases online from a foreign vendor: Say you’ve seen that bag on the website of a fancy French department store. You may be charged a foreign transaction fee if you buy it online without ever leaving your couch.

Capital One doesn’t charge foreign transaction fees. View important rates and disclosures.

But among credit card issuers that do, foreign transaction fees generally range from 1% to 3% of each transaction.

The foreign transaction fee is a percentage of the total purchase. So to calculate it, 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 fee. 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.

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.

Capital One doesn’t charge foreign transaction fees. View important rates and disclosures. Learn more about credit cards that don’t charge foreign transaction fees.

There are several options to explore when it comes to avoiding foreign transaction fees when you make purchases outside the U.S.

Some travel rewards credit cards are designed with international travel in mind. They may have an annual fee, but the rewards and benefits can make it worthwhile.

Capital One’s travel and miles rewards credit cards allow you to earn unlimited miles on every purchase and elevated rewards for travel-related bookings. Plus you’ll get access to Capital One Travel.

• Venture X card: This travel card offers cardholders double miles on every purchase. 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 card: Like Venture X, this card has an annual fee and lets you earn unlimited miles on purchases and additional rewards on travel purchases, without foreign transaction fees. View important rates and disclosures.

• VentureOne card: 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 for Good Credit card: With similar benefits to the VentureOne card, like travel rewards and no foreign transaction fees, this card is designed for people with a good credit score. View important rates and disclosures.

Using your debit card 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 operator 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 whether there’s a branch location or partner bank where you’re headed. You might be able to make free cash withdrawals from one of those locations.

Capital One doesn’t charge additional fees for debit card foreign transactions. But you may be charged a fee by the operator if you use an out-of-network ATM.

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.

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 can add up quickly, but there are 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 foreign transaction fees.

Capital One offers travel rewards credit cards with exclusive benefits and elevated rewards that can help make your travel experience more enjoyable. View important rates and disclosures.

• Explore travel rewards cards with unlimited miles you can actually use. 

• Earn a one-time 75,000-mile bonus and receive an additional 10,000 bonus miles every year, starting on your first anniversary, with the Venture X card.

• Earn unlimited 2X miles on every purchase, every day, and earn a one-time 75,000-mile bonus with the Venture card. 

• Earn unlimited 1.25X miles on every purchase, every day with no annual fee with the VentureOne card.