The Best Ways to Avoid Foreign Transaction Fees

Holly Johnson

May 23, 2019  •  5 Minute Read

Credit Cards

Planning an overseas trip can be a lot of fun, but it’s also a lot of work. After all, you have to shop for international airfare, decide which type of lodging to stay in (e.g. Airbnb, bed-n-breakfast, or luxury hotel?), plan your excursions, and create an itinerary that’s both educational and fun.

Then there are the financial aspects of your trip — as in, how much is all of this going to cost? While traveling overseas doesn’t have to be expensive, there are plenty of financial pitfalls to be aware of, and that includes foreign transaction fees.

What is a Foreign Transaction Fee?

Foreign transaction fees are almost exactly what they sound like they would be — fees charged on purchases you make outside your home country. Not only can foreign transaction fees be charged on purchases you make overseas, but they can also be charged when you make a purchase with an overseas vendor that processes your transaction in their home country.

While foreign transaction fees can vary, they usually equal out to around 3% of each purchase you make. Fortunately, there are plenty of ways to avoid these fees if you plan ahead. Here are the best strategies to consider as you map out every detail of your trip abroad:

Apply for a Credit Card that Doesn’t Charge Foreign Transaction Fees

Because credit cards come with zero fraud liability, they are often considered the safest way to pay for purchases whether you’re at home or traveling the world. However, some credit cards are geared specifically to consumers who travel — either because they offer travel-specific rewards or because they come with no foreign transaction fees.

Of course, the best travel credit cards on the market today come with lucrative rewards and no foreign transaction fees. For example, the Capital One Venture Rewards Credit Card doles out unlimited 2x miles on every purchase, every day. Fly any airline, stay at any hotel, anytime; no blackout dates. Capital One lets you redeem your earned miles for any type of travel at a rate of one cent per mile. This card also comes with no foreign transaction fees and you will enjoy a one-time bonus of 75,000 miles once you spend $4,000 on purchases within 3 months from account opening, equal to $750 in travel. This card also comes with an annual fee of $95.

Rate & Fees *Information for this card is not reviewed by or provided by Capital One

Another card that works similarly is the Barclaycard Arrival Plus® World Elite Mastercard®. This card also gives you unlimited 2x miles on every purchase. You can also enjoy earning 70,000 bonus miles after spending $5,000 in purchases in the first 90 days of account opening. There are no foreign transaction fees ($0 of each transaction in U.S. dollars), and you can cash in your points for any type of travel over $100 (or 10,000 miles) at a rate of one cent per mile. The $89 annual fee on this card is also waived the first year.

If you prefer to earn cash back, you can also consider the Capital One® Savor® Cash Rewards Credit Card. This card offers a one-time $300 cash bonus after you spend $3,000 on purchases within the first 3 months from account opening. Not only do you avoid foreign transaction fees, but you can earn unlimited 4% cash back on dining and entertainment, 2% back at grocery stores, and 1% back on all other purchases. Plus, earn 8% cash back on tickets at Vivid Seats through May 2020. A $95 annual fee applies, but it’s waived the first year.

*Information for this card not reviewed by or provided by Capital One

Open a Bank Account That Reimburses Fees

While having a credit card with no foreign transaction fees on hand is always a good idea when you travel — but especially when you travel abroad, you can also avoid foreign fees by signing up for a bank account that reimburses certain ATM fees.

As an example, Capital One 360 and Discover Bank don’t charge foreign transaction fees when you use a foreign ATM, although the ATM itself may tack its own fees when you make a transaction.

One of the best bank accounts for people who travel overseas is Schwab’s High Yield Investor Checking, although it works best for existing Schwab customers. With this account, you get unlimited ATM fee rebates worldwide and no additional fees for currency conversion. You also don’t pay any account maintenance fees, and the minimum balance requirement can be waived if you connect your account with a brokerage account from Schwab.

Exchange Currency Before You Go

If you want to have some local cash on-hand or you hope to avoid foreign fees without opening a new bank account, you can also head to your bank before your trip to make a currency exchange. Keep in mind, however, that most banks won’t have every type of currency available unless you ask. You are best off giving your bank at least a few weeks of notice, so don’t wait until the last minute.

Your bank may or may not charge fees for exchanging currency, so you’ll need to ask ahead of time to find out. If you find your bank plans to charge exorbitant fees, it makes sense to try another bank or credit union in your area. Of course, you may only get a no-fee transfer with banks you have an ongoing relationship with.

As a last resort, you can always exchange currency with Travelex at your local airport. We say this should be your last resort because Travelex exchange rates are paltry. As of this writing, for example, Travelex will only give you 811.20 euros for each $1,000 you exchange even though a fee-free exchange would net you 891.48 euros.

The Bottom Line

Before you pack your bags and head overseas, it helps to have a plan in place for the financial aspects of your trip. This includes setting a budget or spending plan for your travels, but it also means having a plan to avoid foreign transaction fees.

While a credit card with no foreign transaction fees seems like the no-brainer solution to this dilemma, you can also get cash before you depart on your trip or consider a new bank account that waives overseas ATM fees. No matter which option you choose, avoiding foreign transaction fees always makes sense. These fees don’t add any value to your life, and your money will be much better spent enjoying the trip you’ve worked so hard to afford.