What Can You Expect From No Foreign Transaction Fee Credit Cards?
Here’s what you should know about no foreign transaction fee credit cards:
Annual fee: Nearly 60% of no foreign transaction fee cards charge no annual fee or waive the annual fee for the first year.
Travel rewards: No foreign transaction fee cards tend to be a good choice for travel rewards, with more than 80% earning at least 1.5 points or miles per dollar on travel purchases.
APR: Almost 70% of no foreign transaction fee cards have a minimum APR of between 15% and 18.99%.
What Are Foreign Transaction Fees?
Foreign transaction fees, sometimes referred to as FX fees, are costs added to your statement for purchases that are made in a foreign currency or that pass through a foreign bank. This includes online purchases made in a foreign currency. The fee is calculated as a percentage of the purchase price, usually up to 3%.
When you make a credit card purchase in a foreign country, your credit network converts the foreign currency to dollars using its exchange rate process. It then charges your bank a fee based on the amount, typically 1%, to offset the conversion cost and risk of fraud inherent to international transactions. Your issuer may pass that fee on to you and add its own fee of 1% to 2%.
Dynamic currency conversion
Through a process known as dynamic currency conversion, it is possible to be charged in dollars while traveling abroad, but you’re likely to pay more in fees, so you should avoid it.
At the point of sale, a foreign merchant may ask if you want to be charged in dollars instead of local currency, so that you have a better idea of what the item you’re purchasing costs. While this dynamic currency conversion may sound like a good idea, it’s best to decline and pay in local currency.
The fee that merchants tack onto your bill for the convenience of paying in dollars can be as high as 7% of the purchase price. As Business Insider points out, shopkeepers in busy tourist areas may be unable or unwilling to inform you of the extent of their fee. Additionally, it might not save you from paying a foreign transaction fee, as some credit cards still charge the fee for foreign transactions in U.S. dollars, just at a slightly lower rate.
Finally, you may get a better exchange rate by letting your credit card provider do the currency conversion to dollars.
How Should You Choose a Card With No Foreign Transaction Fee?
Determine what type of credit card you want.
There are many types of credit cards that might not charge a foreign transaction fee. When choosing a card with no foreign transaction fee, first figure out what type of credit card you want, and then select the best one in that category with no foreign transaction fee.
Make sure the card is widely accepted overseas.
Visa and Mastercard are the most widely accepted. Because of higher processing fees, American Express and Discover have lower acceptance rates worldwide than Visa and Mastercard. They’re fairly well-accepted in the U.S., Canada and Mexico but may be limited elsewhere. Although both American Express and Discover continue to improve their global reach, it’s best to carry a backup Visa or Mastercard for a wider range of acceptance.
Look for useful travel benefits.
Many cards with no foreign transaction fees may stand out as great travel cards with extensive travel benefits. World Elite Mastercard and Signature Visa cards, in particular, offer perks that often include:
- Trip cancellation/interruption insurance
- Trip delay reimbursement
- 24/7 concierge services
- Lost luggage reimbursement
- Auto rental collision damage waivers
- Baggage delay insurance
- Roadside assistance
- 24/7 customer service
While these benefits are helpful for any trip, cards with travel protections and perks can prove extremely useful when traveling in a foreign country. For example, 24/7 concierge services can help you plan your international journey all the way down to details like dinner reservations. They also provide access to emergency services.
What Should You Know About Traveling Abroad With Your Credit Cards?
Try these tips to avoid financial surprises on your trip:
- Contact your issuer. Some issuers encourage cardholders to let them know about travel plans so they don’t freeze your account for fraud as you make purchases that may be flagged as unusual activity. Ask for your credit card PIN, as some merchants use pin verification rather than signatures.
- Carry a debit card. Debit cards are much more advisable for ATM withdrawals abroad than credit cards. Using a credit card to withdraw some local currency could subject you to an out-of-network ATM fee and a processing fee from the ATM operator. Plus, credit card ATM withdrawals are treated like cash advances, which often carry exorbitant interest rates with no grace period, which means interest begins accumulating immediately.
- Be aware of the exchange rate. Credit card networks typically provide exchange rates that are very close to the fair market rate, but you should have a frame of reference before you travel. You can install an app on your phone for on-the-spot conversion.
- Avoid dynamic currency conversion. You risk paying a much higher conversion rate on top of additional fees.
- Make sure your card has an EMV chip. If not, ask about switching to a chipped card at least two weeks before your trip date to allow your issuer time to mail you a new card.
- Bring photocopies of your cards. Having a photocopy of the front and back of your credit card(s) gives you easy access to the customer service number if it’s lost or stolen. Black out details like the cardholder name, expiration date and CVV number.
- Carry a backup card. There’s always a chance your card could be lost, stolen, frozen for fraud or not accepted by a particular merchant. Consider carrying a debit card for cash, a Visa or Mastercard for wide credit card acceptance and an additional credit card in case your primary card is unusable for any reason.
- Research your card’s travel benefits. Depending on your card, you might be entitled to benefits that can help you deal with travel mishaps like lost bags, trip delays, broken-down rental cars and more. Certain travel cards can also get you perks such as discounted or free entry to airport lounges, priority boarding, free checked luggage, priority boarding and free in-flight Wi-Fi.
- Know what your card issuer can do if something goes wrong. If your credit card is lost or stolen, your issuer may offer expedited card replacement or an emergency cash advance. Some cards offer a 24/7 benefits administrator who can supply medical referrals, contact loved ones on your behalf and arrange for payments in emergency situations. They may also provide translation services, legal referral help, prescription assistance and other emergency services.