Travel Tip: Avoid Credit Card Foreign Transaction Fees
Credit cards are a great tool as long as you manage your finances well, don’t pay interest and fees, and can control your spending.
You can earn cash back (or miles or points) for your credit card purchases – which means you’re leaving money on the table when you pay with cash instead (assuming price is the same).
I try not to judge, but I literally cringe to see people pay cash when they could use a credit card instead.
And credit cards come with consumer protections that cash lacks. If your cash is lost or stolen, it’s gone unless you’re lucky and someone returns it. If you lose a credit card, you just call the card issuer to report it. The card is cancelled and you’re not responsible for unauthorized charges.
Whether or not I’m traveling, I avoid carrying a lot of cash. It’s safer and easier; there’s less to lug around and look after.
But this isn’t a sales pitch for credit cards. Rather, it’s a post to help you avoid a potential downside of credit cards.
The problem: foreign transaction fees
Many cards charge a fee when you purchase something in another currency. This often happens while traveling abroad, but can also happen when you’re using the card in your home country but buying from a foreign merchant.
The fee varies from card to card, but I have seen it as high as 3%. That may seem a small number, but it adds up if you travel frequently. And why pay it at all if it’s avoidable?
The solution: pay with a card that does not have foreign transaction fees
To determine if a card has these fees you can simply call the number on the back of the card and ask. Alternatively, look in the fee disclosure (usually labeled something like “pricing and terms” on the card issuer’s website).
Below is a random example, with the subject fee (3% in this case) boxed in blue:
There are plenty of cards that charge 0%, and those are the ones I use when traveling.
By the way, using cash to avoid this fee is usually not an ideal solution. You’d still have to buy the foreign cash – at a price. That price might be charged separately or it might be built into the exchange rate, but either way you are paying to convert currency. As an individual you have less negotiating power than a credit card issuer (usually a bank) so you’ll get an even worse exchange rate than you would using a credit card.