Are you preparing to take an international trip? Be sure to pack your passport, as well as at least two credit cards. In order to ensure a smooth trip, it's important to understand the implications of using your card in another country, including foreign transaction fees.
If you travel often or do business overseas, using a card without foreign transaction fees can help you save money. This article will go over what foreign transaction fees are, tips for using credit cards abroad and how to pick the best travel credit card.
- What is a foreign transaction fee?
- How many credit cards should I travel with?
- 3 tips for using your card when traveling
- How to choose the best card for international travel
What is a foreign transaction fee?
Foreign transaction fees are charges made for purchasing items in a foreign currency or for items purchased involving a foreign bank; that includes buying something online from a website outside the United States. Both credit and debit cards can incur foreign transaction fees, and this includes using an ATM outside of the U.S.
How much are foreign transaction fees?
Foreign transaction fees run about 1% to 3% of the purchase amount. They usually come in two parts — one that's charged by the card issuer and another charged by the payment network.
When do I need to pay a foreign transaction fee?
You won't notice a foreign transaction fee until you take a look at your credit card statement. This is because the fee isn't usually charged until the transaction is converted to U.S. dollars.
How do exchange rates affect foreign transaction fees?
An exchange rate is how much one currency is worth when exchanged for another currency. Exchange rates don't affect foreign transaction fee percentages, but they can affect the dollar amount you'll be charged in fees.
What is dynamic currency conversion?
Dynamic currency conversion is when the purchase amount is converted from a foreign currency to the currency of the purchaser at the point of sale. This is done by either an ATM or a merchant.
While it's nice to see how much you're spending in your own country's currency, dynamic currency conversion isn't usually a good idea because the conversion rate you'll receive at the point of sale is often less favorable than if you let your issuer deal with the conversion. It also won't take the place of paying a foreign transaction fee.
How many credit cards should I travel with?
It may be beneficial to travel with two cards. You'll want to have a backup card and cash in case your primary card isn't accepted where you're traveling.
3 tips for using your card when traveling
Try these three tips when using your credit card abroad:
- Let your issuer know you're going on a trip: If your issuer suggests setting travel notifications, alert your issuer before you leave so they know you're away and won't think your activity abroad is fraudulent.
- Know your fees: Check the terms of your card so you know if you'll have any foreign transaction fees charged to you. This will avoid any surprises on your statement when you return home.
- Avoid dynamic currency conversions: They'll most likely cost you more money than if you let your card issuer handle the conversion.
How to choose the best card for international travel
When choosing the best travel card, consider the following:
- Look for a credit card with no foreign transaction fees: No foreign transaction fee credit cards won't charge you for purchases made outside the United States.
- Annual fees: A card that doesn't charge foreign transaction fees may charge an annual fee, so consider that when choosing a credit card.
- Rewards: Consider the different perks and rewards available with no foreign transaction fee cards. For example, a travel rewards card can help you earn points on your travel purchases.
- Confirm your card will be accepted: Check that your card is accepted in the destination you are traveling to before assuming that any card with no foreign transaction fees will be the best one to use.
- Travel benefits: Consider a card with travel benefits. Examples include things like baggage delay insurance and trip cancellation insurance.
It's exciting to plan an international trip, but it also requires some consideration when it comes to the credit cards you choose to travel with. Understanding foreign transaction fees and how to avoid them is a big advantage.