If you have recently traveled abroad and used your credit card while you were on your trip, you may have been surprised to find a foreign transaction fee on your credit card statement. It is not a mistake. This is a legitimate fee that issuers top up many credit cards and unfortunately it is not one that you can easily have waived after the fact.
A foreign transaction fee is a charge credit card company if you use your credit card internationally or if you make a purchase that uses a foreign bank. For example, you might face a foreign transaction fee when you book a flight through Singapore Airlines, even if you are in front of your computer in Springfield, Missouri. The fee is charged for the convenience of converting the foreign currency into US dollars and makes the price of an international trip more expensive.
How Much is the Foreign Transaction Fee?
Visa and Mastercard charge a 1 percent foreign transaction fee and many credit card companies add an additional percent stapling. This will make your foreign transaction fee between 1 and 3 percent of the transaction, depending on your credit card company and payment processing network. American Express charges a 2.7 percent fee on some of their credit cards and waives the fee on others. Do not discover any foreign transaction fee on one of your credit cards. Some leading and travel rewards credit cards charge no fee at all and even absorb some or all of the fee charged by payment processing network.
So check if your credit card charges a fee
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Credit card companies are required to disclose the foreign transaction fee to you. In 2006, some of the major credit card companies had to pay a cardholder settlement because the issuers would not have told cardholders if they had charged a fee. Now these fees are revealed in the credit card contract. Read your credit card contract to discover the exact fee from your credit card issuer to calculate foreign transactions. If you don’t have a copy, you can find one on your credit card issuer’s website or the federal credit card contract database. You can also call your credit card issuer to find out if your credit card has a foreign transaction fee and if you can expect to pay it.
How To Avoid Foreign Transaction Fees
There are many credit cards that do not charge a foreign transaction fee, so consider opening this before an international trip. Both Capital One and Discover have removed the foreign transaction fee from all of their credit cards, so if you already have one in your wallet you can swipe on your trip knowing you won’t be charged any additional fees. You can also choose to use cash or other currency on your vacation to avoid the fee altogether, but be aware that carrying cash can be unsafe. If your money is stolen, you can no longer recover the funds. With a credit card, on the other hand, you are not responsible for fraudulent charges as long as you report theft in a timely manner.