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How to Avoid Foreign Transaction Fees

Published March 11, 2024
4 min read

Keys points about: foreign transaction fees

  1. Credit cards are a good option for a safer and more convenient experience abroad.

  2. Some credit cards charge you a foreign transaction fee on purchases made abroad or online through an overseas merchant.

  3. Discover credit cards have no foreign transaction fees, which may allow you to save on each international purchase.

When you’re traveling abroad or shopping online with a foreign seller, your credit card can be a big convenience. Credit cards can make shopping easier and safer. But after using your card for a transaction in a foreign currency, you might find that your transactions are more expensive than you expected.
This may be because your credit card has added a foreign transaction fee to the transaction. These charges can add up quickly, so it helps to know how to avoid foreign transaction fees.

What is a foreign transaction fee?

A foreign transaction fee is a surcharge that you pay for transactions in a foreign currency. Harvard Global Support Services explains that a foreign transaction fee covers the cost of converting currency. It’s usually around 1-3% of the total transaction cost.

Foreign transaction fees may apply when you shop while traveling abroad or online from a seller outside the U.S., regardless of what you buy. You may have a card issuer, like Discover, that has no foreign transaction fee.

Foreign transaction fees may differ from one card or lender to the next, like an ATM fee often varies across banks. It may seem insignificant at face value, but when you consider the number of transactions you might carry out on a typical vacation day, the costs add up quickly.

You’ll likely pay for at least two meals, transportation, and some sort of activity, as well as shopping for souvenirs and gifts. If your vacation already costs you thousands of dollars, foreign transaction fees could make a big dent in your budget.

How do foreign transaction fees work?

If your credit card issuer or financial institution charges foreign transaction fees, the fee is applied to every credit or debit card payment you make outside the U.S., including any purchases you make during layovers.

The good news for travelers is that not all credit cards charge foreign transaction fees. You can check your card’s terms and conditions to see if your card charges foreign transaction fees and, if so, what the fee percentage is. Discover Card is accepted at millions of places around the world1 and has no foreign transaction fee.

See if you're pre-approved

With no harm to your credit score 2

How to avoid paying foreign transaction fees

If you have an international vacation coming up or just want to make a purchase from an overseas seller, it may help to know a few tips for avoiding foreign transaction fees. The easiest way is to apply for a credit card without foreign transaction fees, but there are alternatives if that doesn’t work for you.

Did you know?

When you’re researching credit cards, try looking for a card that combines multiple benefits, like rewards and minimal fees. Discover has no annual fee on any credit card. So, in addition to saving on transaction fees, you also save on annual fees.

Pay with cash  

Some travelers may opt for a cash-only approach, but this has its own drawbacks. Cash can be lost or stolen–most often with no recourse. Additionally, withdrawing cash from your checking account or savings account abroad can be costly thanks to currency conversion or foreign ATM withdrawal fees. Credit cards are not only safe and easy to travel with, but they also offer fraud protection if they're lost or stolen.  

Pay in the local currency  

Some merchants may give you the option to pay either in their local currency or your own home currency.  

It may seem convenient to pay in the currency you’re more comfortable with, but it’s usually a better idea to pay in the local currency. This is because the merchant accepting your home currency payment may charge a fee for a process known as dynamic currency conversion (DCC). DCC converts the foreign currency rate to your local rate, so you know what you're spending in U.S. dollars, which sounds great at first. But the DCC fee may be on top of the foreign transaction fee you’re already paying, making the transaction even more expensive.   

For those who enjoy trips abroad or shopping online from other countries, a credit card with no foreign transaction fees can be a convenient option for payments. A credit card company like Discover may also allow you to earn rewards on your international purchases. With the right credit card, you can save as well as make the most of every purchase even when you’re abroad.

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  1. Discover Acceptance: Merchant acceptance rates vary by country. Prior to international travel, check Discover’s acceptance map. Register your travel plans to minimize purchase interruptions.
  2. There is no hard inquiry to your credit report to check if you’re pre-approved. If you’re pre-approved, and you move forward with submitting an application for the credit card, it will result in a hard inquiry which may impact your credit score. Receiving a pre-approval offer does not guarantee approval. Applicants applying without a social security number are not eligible to receive pre-approval offers. Card applicants cannot be pre-approved for the NHL Discover Card.