Foreign transaction fees—what are they and how do they work? (2024)

When you make a purchase in another currency, some banks and card companies charge a fee to facilitate the transaction. And while fees on foreign transactions are common, some financial institutions offer this service at no extra cost.

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Foreign transaction fees—what are they and how do they work? (1)

What is a foreign transaction?

A foreign transaction is an electronic payment made in a currency other than your own.Here are some types of foreign transactions:

  • ATM withdrawals in a foreign country
  • Online card payments in currencies other than your banking currency
  • Payments made while abroad
  • International money transfers

Foreign transaction fees‌: A breakdown

Foreign transaction fees are often charged by a bank or card company on any transaction made outside your currency or region of use. The total fee charged is generally broken down into two parts.

  1. First, there’s a currency conversion fee for transferring the money from one currency to another, typically around 1%.
  2. Second, there’s the transaction processing fee (usually around 2%) charged by the bank or card company for providing an international service.
Foreign transaction fees—what are they and how do they work? (2)

Why do we pay foreign transaction fees?

Foreign transaction fees are designed to cover the cost of converting one currency into another. Unlike standard transfers, transfers between currencies are complex, involve more channels, and take longer — often resulting in higher fees.If you’re planning to send money abroad, it’s worth taking currency conversions and transaction fees into account to avoid any unpleasant surprises. Learn more about transaction fees abroad and how they work here.

Avoiding extra foreign transaction fees abroad

There are several ways to avoid extra foreign transaction fees. For example, try bringing a no-fee debit card when you travel, withdrawing currency ahead of your trip, and avoiding multiple visits to foreign ATMs. It’s also a good idea to pay cash in the local currency to sidestep any transaction fees on site.

Foreign transactions‌ and ‌currency exchange rates

In addition to watching out for high foreign transaction fees, it’s important to consider currency exchange rates when making payments abroad. These rates are based on global trade markets and are used to calculate the sender’s currency into the recipient’s. Need a refresher on foreign currency exchange? Check out our handy guide here.

Do all companies charge foreign transaction fees?

Not all banks or card companies charge foreign transaction fees‌ — ‌some absorb the costs themselves. To learn what fees you might be subject to, check with your bank or card issuer.At N26, all account holders can make card payments overseas for free, with no foreign transaction fees on top. Discover all the N26 benefits of our accounts here.

Get ‌free payments worldwide and no hidden fees with N26

At N26, all our accounts feature free card payments worldwide — as often as you like and with no foreign transaction fees. N26 You and Metal account holders can withdraw cash for free at foreign ATMs, while customers with Standard and Smart accounts are charged a fixed 1.7% conversion fee on the withdrawal amount.

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N26 You and Metal: Get unlimited free ATM withdrawals abroad

As an N26 You or Metal customer, not only can you enjoy unlimited free card payments globally, you can also withdraw cash in any currency as often as you want — free of charge.You’ll also get real-time exchange rates when making international transfers. Plus, you’ll benefit from a travel insurance package that includes trip cancellation and medical coverage.

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Foreign transaction fees—what are they and how do they work? (20)
Foreign transaction fees—what are they and how do they work? (21)

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Foreign transaction fees—what are they and how do they work? (22)
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Foreign transaction fees—what are they and how do they work? (24)
Foreign transaction fees—what are they and how do they work? (25)
Foreign transaction fees—what are they and how do they work? (26)

€9.90/month

  • Up to 5 free withdrawals in the Eurozone

  • Flight and luggage delay cover

  • Medical emergency cover

  • Winter activities insurance

  • Pandemic coverage

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Foreign transaction fees—what are they and how do they work? (28)
Foreign transaction fees—what are they and how do they work? (29)

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  • Purchase protection

  • Phone insurance

  • Dedicated N26 Metal line

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  • What is a foreign transaction?

  • What is a foreign transaction fee?

  • Do all card companies charge foreign transaction fees?

  • Does N26 have any hidden foreign transaction fees?

  • Does N26 charge foreign transaction fees to withdraw cash from ATMs?

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Foreign transaction fees—what are they and how do they work? (2024)

FAQs

Foreign transaction fees—what are they and how do they work? ›

These fees are typically 1%–3% of the value of the transaction and are paid by U.S. travelers in dollars. Online purchases that take place with overseas vendors may also be subject to such a fee. Several banks or credit card issuers now offer certain customers waivers on these fees, or fee-free cards.

How does foreign currency transaction fee work? ›

A foreign transaction fee is charged by your bank or card issuer when you make a purchase in a foreign currency or through a non-domestic bank. It's usually a percentage of the transaction amount, and is sometimes called an administrative fee.

What is considered a foreign transaction fee? ›

A foreign transaction (FX) fee is a surcharge on your credit card bill that appears when you make a purchase that either passes through a foreign bank or is in a currency other than the U.S. dollar (USD). This fee is charged by many credit card issuers, typically ranging from 1% to 3% of the transaction.

How do I avoid foreign transaction fees? ›

The following steps will help you avoid foreign transaction fees:
  1. Open a Credit Card Without a Foreign Transaction Fee. ...
  2. Open a Bank Account Without a Foreign Transaction Fee. ...
  3. Exchange Currency Before Traveling. ...
  4. Avoid Foreign ATMs. ...
  5. Ask Your Bank About Foreign Partners.

What are charges for foreign transactions? ›

"Also known as a foreign transaction fee, a markup fee is charged by credit card issuers on transactions made in foreign currencies or with foreign merchant. This fee typically ranges from 1.5% to 3.5% of the transaction amount. A Goods and Services Tax (GST) of 18% is applied to the markup fees.

What card does not charge international fees? ›

Best Credit Cards With No Foreign Transaction Fee of August 2024. United Gateway℠ Card: Best feature: United Airlines rewards. Discover it® Cash Back: Best feature: Cash back on everyday purchases. IHG One Rewards Traveler Credit Card: Best feature only: Bonus points at IHG hotels.

Can I use my Visa debit card internationally? ›

Can I use my American Visa credit or debit card abroad? You can use your U.S. Visa card abroad to make purchases or withdraw cash. To withdraw cash from an ATM, you'll need to know your four digit PIN number.

How to tell if your credit card has foreign transaction fees? ›

Not all credit cards charge a foreign transaction fee, but many do. To find out if your card does, check the “fees” section of the terms and conditions for your card.

Is a 3% foreign transaction fee bad? ›

Foreign transaction fees generally range from 1 percent to 3 percent and tend to average around 3 percent of each transaction. Paying around $3 per $100 you spend may not sound that expensive, but these fees can add up if you're making a lot of purchases with your credit card.

Which bank has no foreign transaction fee? ›

Discover® Bank

Discover doesn't charge foreign ATM network or foreign transaction fees. But Discover card acceptance can be limited outside of the U.S., Canada, Mexico and some Caribbean nations. With an HSBC Premier Checking account, customers pay no foreign transaction fees. HSBC also has a worldwide network of ATMs.

How can I avoid fees using my card abroad? ›

Pay in the local currency

You could potentially avoid any currency conversion fees (when transactions are processed in GBP), and in some cases, get a better exchange rate. Check with your lender about whether there are fees for using your credit card abroad.

Do debit cards charge foreign transaction fees? ›

Foreign transaction fees are charges that credit card issuers, banks and other financial institutions impose when you use an electronic payment card to make a purchase in a foreign country or to buy goods and services in another currency. You can incur these fees whether you're using a debit card or a credit card.

How can I get cash without foreign transaction fee? ›

Use a travel credit card instead

Instead of looking for ATM machines and withdrawing cash to pay for your purchases, consider using a travel credit card that waives foreign transaction fees. That way, you can skip ATM fees and not need to worry about carrying a lot of cash around with you.

What counts as a foreign transaction fee? ›

What Is a Foreign Transaction Fee? A foreign transaction fee is a charge assessed by a financial institution to a consumer who uses an electronic payment card to make a purchase in a foreign currency.

Which debit card is best for international transactions? ›

4. Which is the best international travel card?
  • The Fi. Money Federal Debit card.
  • Axis Bank Multi-Currency Forex Card.
  • HDFC Bank Regalia ForexPlus Card.
  • ICICI Bank Student Forex Prepaid Card.
  • State Bank Multi-Currency Foreign Travel Card.
Jun 10, 2024

How to pay abroad without fees? ›

Here are some of the most efficient, cheapest and safest ways to spend your money abroad.
  1. Travel debit cards. You can use your debit card, but this can be an expensive mistake as you may pay unnecessary fees when you spend or withdraw cash from an ATM. ...
  2. Travel credit cards. ...
  3. Prepaid travel cards. ...
  4. Cash.
Jun 11, 2024

Is 3% foreign transaction fee a lot? ›

Foreign transaction fees generally range from 1 percent to 3 percent and tend to average around 3 percent of each transaction. Paying around $3 per $100 you spend may not sound that expensive, but these fees can add up if you're making a lot of purchases with your credit card.

How is international transaction fee calculated? ›

How To Calculate Foreign Transaction Fees. A foreign transaction fee is typically calculated by adding the predetermined fee percentage charged by your credit card issuer to a purchase made with a foreign merchant to the cost of the original purchase.

How to avoid DCC charges? ›

Choose the Local Currency Option

Always choose the local currency to avoid dynamic currency conversion (DCC) fees, which can be higher than standard forex charges.

Are foreign transaction fees refunded? ›

Banks rarely refund foreign transaction fees once they have been assessed on legitimate transactions. However, many banks offer credit and debit cards that do not charge foreign transaction fees.

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