Avoid Credit Card Foreign Currency Transaction Fees

American 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 either a Capital One Card—Capital One credit cards don’t charge a conversion fee but, as some commenters have pointed out, may not give you the best exchange rate—or an American Express Card.

American Express cards are slightly better than average with a 2% fee. One caveat, they may not be as widely accepted overseas as Visa or MasterCard. Discover credit cards do not charge a fee but are virtually unheard of outside of the U.S. A good strategy? Carry an AMEX card and us it wherever you can, and use cash or a Visa or MasterCard debit card when you can’t.

Find the best card for you: Compare hundreds of cards at CreditCards.com now »

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Dylan Hrncir 23 August 2008 at 4:50 pm permalink

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.

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Money Under 30 15 September 2008 at 4:59 pm permalink

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.

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Elman 1 December 2008 at 5:10 pm permalink

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

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Gloria 14 January 2009 at 2:44 pm permalink

I live in a foreign country on US Currency, British Virgin Islands. It is the only currency we have. For 8 years, I’ve charged food, gas, electric, phone, etc. on my Citibank card. They have now begun charging me 3%, even though the transactions are all in US Dollars to start with. They tried to tell me it was ALL visa and mastercard, but that is not true. So far, I have not found another credit card charging this 3%. Maybe because Citigroup is the only one (so far) who has gone up to Washington asking for a handout of taxpayer dollars! However, if I wanted to transfer a $20,000 credit card balance to them, the rate would be 0%. They are INTENTIONALLY going after the bad credit, and punishing people like me, who pay my bill in full each month. They should never have been allowed to make their business on finance charges on bad creditors. They were supposed to be happy with the 2.5% from vendors!! How did we get in such a mess? CONGRESS!

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Mister Ed 23 January 2009 at 6:19 am permalink

Growing Greed Among Credit Card Companies:
In 2008, Bank of America and other banks started charging their credit card customers fees for making certain internet purchases. For example, a 3% foreign currency fee is charged if the transaction is processed through a foreign bank, even if the transaction involves only US dollars. This is just plain greedy. But that’s not all. On the customer’s statement, the retailer’s name is printed next to the fee, as if the retailer (or “merchant”) charged the fee, not the bank. This makes it look like the retailer is charging the customer twice – once for the correct amount, and again for the bank fee, which is not identified as such. Consequently, our customers have been phoning us to complain. All we can do is tell them that Bank of America is responsible for this scam, not us. According to one article I found on the internet, the Bank of America’s practices are illegal. (The Truth in Lending Act – Regulation E and Regulation Z – and the Truth in Savings Act require banks and financial institutions to disclose when such fees are passed on to debit card and credit cardholders.)

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ixus 25 January 2009 at 6:11 am permalink

I just purchased something from UK using Capital One, and I can say that their exchange rate is fair enough. The GBP USD rate on that day is between 1.375-1.385. I got charged with rate ~1.386. That’s better than I expected.

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