As cold temperatures continue to plague us, you’re likely considering a tropical vacation to the beach or some exotic situation. You’ve likely heard that you can use credit cards to get valuable rewards and benefits that make travel more accessible, and that’s true! However, there is one important factor you should consider before applying for a travel rewards credit card: foreign transaction fees.
What are foreign transaction fees?
Credit card offers charge certain fees. One of the most common are foreign transaction fees. These fees are charged whenever you make a purchase with a non-U.S. retailer. The fees are generally set as a percentage of your total purchase; they’re typically about 3%.
That 3% may not sound very high. However, pretend you went abroad for a week-long trip. Over the course of your trip, let’s say you spent $3,000 on your credit card. Thanks to foreign transaction fees, you’d have to pay an extra $90. Over time, those charges can greatly add to your balance.
You should also keep in mind that foreign transaction fees don’t only apply to when you’re traveling outside of the country. You’ll also pay foreign transaction fees whenever you shop at a retailer outside of the United States, such as when you’re shopping online with certain retailers.
If you regularly travel outside of the United States, it makes sense to look for a credit card that doesn’t charge foreign transaction fees to save money.
What cards charge foreign transaction fees?
Many credit cards charge foreign transaction fees. In fact, a 2017 survey from CreditCards.com found that 56% of credit cards charge foreign transaction fees. Even credit cards reserved for applicants with very high credit scores can charge them, so it’s important to shop around for the best deal.
When shopping for a credit card, make sure you look at the cards Schumer Box. The Schumer Box is a table that details the cards rates and fees. In it, you’ll see what the card charges — if anything — in foreign transaction fees.
What cards don’t charge foreign transaction fees?
While many credit cards charge foreign transaction fees, they’re certainly not universal. In fact, there are some companies — such as Discover — that don’t charge foreign transaction fees at all. Here are some of our favorite picks for international travelers:
Chase Sapphire Preferred® Card: The Chase Sapphire Preferred® Card has no foreign transaction fees. With it, you can earn 2X points on dining at restaurants including eligible delivery services, takeout and dining out and travel & 1 point per dollar spent on all other purchases. You’ll also earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 toward travel when you redeem through Chase Ultimate Rewards®.
Capital One Venture Rewards Credit Card: With no foreign transaction fees, you can earn unlimited 2X miles per $1 spent on every purchase, every day. You can earn 100,000 bonus miles when you spend $20,000 on purchases in the first 12 months from account opening, or still earn 50,000 miles if you spend $3,000 on purchases in the first 3 months.
Southwest Rapid Reward® Priority Credit Card: This card has no foreign transaction fees, and allows you to earn 5 points per $1 spent on Southwest® purchases. Earn between 12/1/2020 and 3/31/2021 on up to $2,000 spent per month. You will also earn 1 point per $1 spent on all other purchases. This card offers 50,000 points after you spend $2,000 on purchases in the first 3 months your account is open. You will also earn 7,500 bonus points after your Cardmember anniversary.
Make sure you compare several different rewards credit cards to ensure you get the best rewards and lowest fees.
The bottom line
Foreign transaction fees are incredibly common. Over time, they can be quite expensive, causing your credit card balance to balloon. By being aware of these fees and comparison shopping for a card that doesn’t charge them, you can save money and avoid costly fees on your transactions.
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