When Are Foreign Transaction Fees Charged?
Fees apply in two scenarios: purchases made while physically abroad (using your card at a restaurant in Paris) and online purchases processed in a foreign currency or through a foreign merchant, even if you are in the U.S. Buying from a UK-based website while sitting at home can trigger the fee. The fee applies to the converted USD amount, compounding the currency exchange cost.
How Can You Avoid Foreign Transaction Fees?
Use a credit card with no foreign transaction fees — many travel rewards cards and some cash back cards waive them entirely. Popular no-FTF cards are available from Chase, Capital One, and Discover (Discover charges no fee but has limited international acceptance). For frequent travelers, this card feature can save hundreds of dollars per trip.
Should You Pay in Local Currency or USD Abroad?
Many travel experts recommend paying in the local currency. When a merchant offers to charge you in USD (called dynamic currency conversion or DCC), their exchange rate includes a markup of 3-7% on top of any credit card fees. Paying in local currency lets your card network (Visa/Mastercard) handle the conversion at a near-wholesale rate, which is almost always cheaper.
Frequently asked questions
Do debit cards also charge foreign transaction fees?
Yes, most debit cards charge foreign transaction fees of 1-3%, plus ATM withdrawal fees abroad. Some online banks like Charles Schwab and Fidelity offer debit cards with no foreign transaction fees and ATM fee reimbursement, making them excellent travel companions alongside a no-FTF credit card.
Does Discover charge foreign transaction fees?
No, Discover does not charge foreign transaction fees on any of its cards. However, Discover has limited acceptance outside the United States compared to Visa and Mastercard. It partners with networks like JCB (Japan), UnionPay (China), and Diners Club for some international coverage, but carry a backup card when traveling.