Budget With Quicken Online (Free!)
Email Newsletter
RSS
Comment
PrintAvoid Credit Card Foreign Currency Transaction Fees
Credit July 28th, 2008American credit cards—Visa and MasterCard in particular—are increasingly accepted all over the world. While they can be a convenient way to pay while traveling aboard, be prepared to pay foreign currency transaction fees of up to a 4% for every dollar you spend overseas.
Avoiding currency exchange fees: While credit cards may provide a better currency exchange rate than a money-changing shop in a tourist neighborhood, your U.S. credit card may also change a foreign transaction fee. These fees, often as much as 4%, can add up quickly.
All American Visa and MasterCard credit cards assess cardholders a 1% foreign currency exchange fee for any transaction outside the U.S. But your issuing bank may charge a fee on top of that 1%. For example, Bank of America, Chase, HSBC, and Citi all charge 3% for foreign currency transactions (for a total fee of 4%). Today, a meal that costs 100 Euro will cost you about $157 plus a $6.28 foreign currency transaction fee.
The best credit cards for charging abroad: Your best bet is any Capital One credit card. Not only do Capital One credit cards not charge a foreign currency transaction fee, they actually reimburse the 1% charged by Visa and MasterCard.
American Express cards are slightly better than average with a 2% fee, but may not be as widely accepted overseas. Discover credit cards do not charge a fee but are virtually unheard of outside of the U.S.
August 23rd, 2008 at 4:50 pm
I’ve seen praise for Capital One a few times, and as a military person living overseas, I obtained a card and gave it a shot. To my surprise I found that the exchange rate that I was paying is about 1% higher than the current exchange rate given by the WSJ.
When I dug really deep into the terms and agreements for Capital One, I found this: “For international transactions, MasterCard’s currency conversion procedure includes use of either a government mandated exchange rate, or a wholesale exchange rate selected by MasterCard for the processing cycle in which the transaction is processed, increased by an adjustment factor established from time to time by MasterCard. The currency conversion rate used by MasterCard on the processing date may differ from the rate that would have been used on the purchase date or cardholder statement posting date.”
I’m guessing that the “adjustment factor” is about one percent. It’s defiantly a worse rate that other cards that I have that carry a 1% transaction fee.
September 15th, 2008 at 4:59 pm
You definitely raise a good point about the conversion rate—I’m not surprised Capital One charges a higher one if they waive the fee. The tricky thing is you never know conversion will be used anytime you use your credit card—or debit card—overseas.
I’ll bet there are a lot of cards out there that charge a full 4% fee and have a crumby conversion rate. All the more reason to really pay attention to the credit card fees you pay.
December 1st, 2008 at 5:10 pm
Capital One Canada charges a 2.5% foreign exchange conversion fee
I just applied online for one and I decided to read the disclosure agreement before I submitted my application and I saw 2.5% foreign exchange conversion fee for foreign transactions. Maybe US capital one is the only one that dont charge foreign exchange conversion fee