Going Abroad? Here’s How to Avoid Foreign Transaction Fees

January 29, 2020 · 6 minute read

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Going Abroad? Here’s How to Avoid Foreign Transaction Fees

The flights are booked, bags are packed, and your itinerary is full of adventurous activities, exciting excursions, and delicious cafés and restaurants.

You’ve used all the best travel hacks to score cheap deals on a luxury hotel, used credit card rewards to book air travel, and strategically organized your transportation to make the most of your vacation budget. You’re ready to finally lean into some well-earned rest and relaxation.

But before you completely sign off, one thing you should consider if you are traveling internationally is how to avoid foreign transaction fees. International ATM fees and other additional transaction costs can add up quickly and cut into your vacation budget while you are on your international adventure.

Don’t let international ATM fees limit your fun. These tips can help you avoid foreign transaction fees so you can make the most of your vacation and enjoy your globe-trotting adventure—with more money for you and less money sent back to the bank.

What Are Foreign Transaction Fees?

A foreign transaction fee is a surcharge that credit card companies add onto transactions that process foreign currency or pass through foreign banks. The most common foreign transaction fee is around 3% of the transaction amount.

The foreign transaction fee is composed of two parts, the fee charged by the credit card network (e.g., Visa, Mastercard) and the fee imposed by the issuer (e.g., Citibank). Some credit card companies charge a fee on top of the network fee, others will absorb the network fee so that you don’t have to pay anything.

Unless a credit card has no foreign transaction fees, issuers don’t usually advertise this information. You will usually have to check the fine print in the terms and conditions when you open an account to see if this fee will be charged and how much it is. It will usually be listed in the “Fees” section, so be sure to review the policies before you open a new credit card.

Foreign transaction fees are usually listed as a separate charge on your credit card statement. Say you spend the equivalent of $100 dining at a restaurant. If your credit card charges a 3% foreign transaction fee, there will be an additional charge of $3.

While that may seem like small change, it can really add up over your trek through Europe or your two-week backpacking trip through Southeast Asia. It’s also worth noting that if you have a rewards credit card, you usually don’t earn any rewards on the foreign transaction fees.

In addition to foreign transaction fees, you’ll also want to keep international ATM fees on your radar as well. Banks will often charge 1% to 3% on ATM withdrawals or debit card purchases.

Here are some great tips for avoiding foreign transaction fees on your credit card and at the ATM.

Recommended: Can I Open a Bank Account While Living in Another Country?

Eliminate ATM Foreign Transaction Fees

You’ve saved up your cash to spend on memorable experiences on your trip, so why give that money to banks in ATM fees? If you can eliminate ATM fees from your vacation budget, you’ll have more money to spend on excursions, sightseeing, food, and souvenirs.

First thing on your list should be to check and see if your bank has any affiliate banks in the country or countries you plan to visit. If so, confirm that the same benefits apply at the partner bank and you should be able to withdraw money from the ATM with no additional fees.

Next, check in with your bank and see what their policy is on fee-free withdrawals. More and more banks and credit unions are offering fee reimbursement or are not charging ATM fees, so see what your account offers.

Exchange Currency Before Traveling

Another way to avoid paying international ATM fees is to exchange currency before you leave the country. Create a budget for your trip and estimate how much money you plan to spend and how much cash you will need.

Your bank or credit union may be able to sell you foreign currency without requiring you to pay additional fees. This is one of the best ways to get foreign currency at a decent exchange rate. Avoid using a prepaid debit card, which could end up costing you extra in fees.

Avoid ATMs in Touristy Places

Avoid exchanging currency at ATMs in airports, hotels, hostels, local 7-Elevens, or other similar places. It may seem convenient to exchange money there, but you’ll pay for that convenience with high ATM fees and poor exchange rates.

Choose Local Currency

When you’re shopping internationally you sometimes have the opportunity to check out in either local currency or U.S. dollars. It may seem convenient to choose dollars since you are more familiar with the currency, but it could cost you.

When you pay with U.S. dollars the merchant chooses the exchange rate to convert the cost of the item—this is called dynamic currency conversion . And, even though you’re paying in dollars, the credit card company may still charge you with a foreign transaction fee.

Researching Your Bank’s Foreign Partner

Many large banks and financial institutions have a partnership or alliance with a bank abroad. Make sure you check with your bank before leaving to learn the names of the banks they partner with. In many cases you won’t be charged any fees with you withdrawing money from those specific ATMs.

Getting a Credit Card Without Foreign Transaction Fees

Another way to help avoid paying for foreign transaction fees when you travel: Get a credit card that has lower fees or no fees at all.

Credit cards often get the best exchange rates, and a credit card without foreign transaction fees could end up saving you money even when you aren’t traveling (you could be charged a foreign transaction fee when you are shopping domestically if the merchant who processes your transaction is based in a different country).

Opening an Account With No Foreign Fees

Similar to above, another option for avoiding foreign transaction fees is choosing an account that offers a debit card with no fees. There are a few accounts out there (like SoFi Checking and Savings) that don’t charge you for withdrawing money or making purchases abroad.

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Open a SoFi Checking and Savings Account and start earning 1% APY on your cash!

Smart Money Management With SoFi Checking and Savings

Shop around for a better online bank account, like SoFi Checking and Savings®.

SoFi Checking and Savings allows you to spend, save, and earn all in one product. Plus, SoFi Checking and Savings has no account fees. And withdrawing cash is fee-free at 55,000+ ATMs worldwide. That being said, our fee structure is subject to change at any time.

Plus, when you open a SoFi Checking and Savings account and become a SoFi member, you’ll benefit from perks like complimentary access to career coaches, credentialed financial planners, and exclusive events.

SoFi Checking and Savings makes it easy to track your money and save for short-term goals, like your next trip, and you can access your account via online portals from anywhere in the world.

SoFi Checking and Savings offers access to your money anywhere, so there is zero hassle when you travel. Learn whether SoFi Checking and Savings could be right for you.

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