What to know about business credit cards and foreign transaction fees
Quick insights
- Foreign transaction fees are typically charged by credit card issuers when a purchase is made in a foreign currency.
- Business credit cards with no foreign transaction fees may help you avoid unwanted costs on international purchases.
- With these cards, the conversion rate still applies for foreign transactions, but there are no added fees.
Some payment methods, such as debit and credit cards, may charge foreign transaction fees on purchases made in another currency, whether online or in person. These fees typically range from 1% to 3% per transaction. If international travel is part of your business operations, these fees can add up quickly.
For example, if a small business spends $50,000 annually on international travel, a 2% foreign transaction fee would add an extra $1,000 in costs. That’s money that could be better spent on business expenses that drive growth, such as marketing, product development or improving the customer experience.
Business credit cards with no foreign transaction fees can help you avoid these unnecessary costs and often offer additional features to streamline international business travel.
How to avoid foreign transaction fees with business credit cards
Some business credit cards don’t charge foreign transaction fees, meaning you only pay the converted amount from the foreign currency to your home currency. While you’re still subject to the conversion rate, these cards don’t add fees related to foreign transactions.
Select travel rewards credit cards also do not charge foreign transaction fees as part of their business travel-friendly benefits. In addition to avoiding foreign transaction fees, these cards may allow businesses to earn travel rewards that can help offset costs. Note that while some cards do not charge foreign transactions, they may still come with an annual fee.
Before traveling, review the credit card’s terms to understand the fee structure and confirm whether foreign transaction fees apply. Keep in mind that even if your credit card doesn’t charge foreign transaction fees, you might still incur a Dynamic Currency Conversion (DCC) fee. This fee is charged when a merchant uses a DCC service, which processes transactions in the cardmember’s home currency.
Pros and cons of using business credit cards abroad
Generally, you can use a business credit card abroad, but acceptance may depend on how widely credit cards are used in a location and can vary by merchant. Credit cards that don’t charge foreign transaction fees eliminate one potential worry when using this payment method abroad, but there are still several other potential benefits and drawbacks to keep in mind.
Here are some of the pros and cons of using business credit cards with no foreign transaction fees when traveling internationally.
Pros
- Business credit cards with no foreign transaction fees can potentially help businesses avoid paying up to 3% per transaction.
- Some business credit cards offer accelerated rewards on travel purchases, such as flights, hotels and dining out.
- Business credit cards could allow you and your employees to travel without carrying large amounts of cash.
- Cards with expense management tools can help track and categorize business expenses, including business travel expenses.
- Credit cards typically have security features to help protect against unauthorized charges.
Cons
- You may still be charged DCC fees by merchants.
- The exchange rates for credit cards fluctuate daily, which could complicate budgeting.
- Not all vendors accept credit cards, and cash may be necessary for some transactions, like tipping or street food vendors.
- There’s a risk of overspending with credit cards if spending isn’t tracked.
- Interest fees may apply if you don’t pay off your balance on time.
Tips for minimizing transaction-related fees abroad
You may help limit fees associated with international transactions by following a few tips.
- Understand your credit card’s terms and conditions before traveling.
- Choose to pay in the local currency rather than your home currency at the payment terminal to avoid DCC fees.
- Exchanging money through your business bank before traveling usually offers a competitive rate, but you can shop around for the most affordable option.
- At your travel destination, withdrawing money from an in-network ATM often provides a competitive rate.
- Be aware that airport kiosks and tourist centers tend to have higher exchange rates.
- Develop a written company travel policy that provides guidance on avoiding fees and managing travel expenses.
Sharing these tips with your employees could help you minimize unwanted expenses related to business travel.
Additional business credit card benefits to look for
When selecting a business credit card, you may want to consider more than just the fee structure. A card that aligns with your business needs could help support growth.
Here are some common features offered by business credit cards that may help you operate more efficiently and maximize growth:
- Rewards program: Earn rewards on common business expenses like travel (e.g. flights and hotels), digital marketing, utilities and office supplies.
- Expense management tools: Access in-depth reporting to help track spending and manage budgets, with the capability to integrate these tools with your accounting software.
- Employee credit cards: Streamline expense management with employee cards, typically allowing you to set individual spending limits and monitor spending in real time.
- Protection benefits: Obtain reimbursement for eligible expenses if something goes wrong during a business trip.
In summary
Business credit cards that do not charge foreign transaction fees may reduce costs for companies that make purchases abroad, potentially making them a helpful tool for businesses with global operations.
To avoid fees related to international transactions, business owners should understand their business credit card’s terms and consider implementing a company travel policy that educates employees on acceptable expenses and payment methods, including guidance on exchanging money and limiting fees.
When selecting a business credit card with no foreign transaction fees, you may want to consider the rewards program, expense management tools and availability of employee credit cards as you evaluate your options.
