What does no foreign transaction fee mean?

The major credit card foreign transaction fees range from 0% to 3% of each purchase processed internationally. The average credit card’s foreign fee is roughly 1.5%. Some credit card companies do not charge foreign transaction fees on any of their cards, including Capital One, Discover and USAA. Other credit card companies charge foreign transaction fees on some, or even most, of their cards. But each of the 10 largest credit card issuers has at least one credit card with no foreign transaction fees.… read full answer

Here are the foreign transaction fees by credit card company:

Issuers charge foreign transaction fees on purchases made outside the U.S., whether in-person or online. The fee is always a percentage of the total purchase amount. The reason credit card companies charge foreign transaction fees is to help pay for the costs of currency conversion in international purchases. It’s essential to take a no foreign transaction fee credit card when going abroad, because those charges can quickly build up.

Yes, foreign transaction fees do apply to online purchases whenever the merchant is based outside the U.S. That goes both for debit cards and credit cards with foreign transaction fees. For example, if you buy something online from a merchant in the U.K. and pay with a card that has a foreign transaction fee, that fee will apply. Foreign transaction fees on credit cards can add as much as 3% onto each international purchase you make. But there’s an easy solution: Just use a credit card with no foreign transaction fee whenever you buy something from a foreign seller.… read full answer

So when in doubt, a no foreign fee card is the way to go. And there are plenty with really good rewards. Plus, credit cards get you great currency conversion rates.

Here’s when foreign transaction fees apply online (and how to avoid them):

• The Basics: Foreign transaction fees apply online when a transaction is processed outside the United States. If you see prices listed in non-U.S. currency, there’s a good chance you’ll be charged a foreign transaction fee on your purchase.
• Fees on U.S. Websites: If you buy something on Amazon.com from a seller in China, Amazon processes the payment, but a foreign transaction fee may still apply because the merchant is located outside the U.S. Remember, your card issuer is the one charging the fee, not the merchant. Similarly, if you book international travel through a U.S. website, you could still be tagged with a foreign transaction fee if the purchase is processed by a foreign airline, hotel, etc.
• Best Way to Pay: A credit card with no foreign transaction fee will save you the most money on international purchases made online. There are plenty of options to choose from, including offers with no annual fee, great rewards and even 0% intro APRs. Plus, credit cards automatically give you low exchange rates and $0 fraud liability.
• Avoid Declined Transactions: Your credit card company could mistake international purchases for fraud and decline them, especially if they don’t match your usual spending habits. You can avoid the inconvenience by notifying your bank or credit union about any international travel or shopping plans you have.
• Prepaid Travel Cards: Credit cards with no foreign transaction fees will generally serve international shopping or travel better than a prepaid card. Even if you go for a prepaid card with no foreign and monthly fees, you’ll miss out on the rewards that many $0 monthly and foreign fee credit cards offer. On the other hand, if you plan on making ATM withdrawals, you’re better off with prepaid cards as their withdrawal fees, if any, will generally be lower than the cash withdrawal fees and interest rates associated with credit cards. To get an idea of the best prepaid cards on offer, it’s definitely worth having a look over these recommendations.

Another thing to watch for is dynamic currency conversion, which is when international merchants’ offers to process your transaction in U.S. dollars instead of their local currency. It’s supposed to be for your convenience, but most often than not, it’s a trick that lets a merchant apply an unfavorable exchange rate to pad its profits a bit, at your expense. So it’s best to decline the overture as it could be as much as 7% higher than the actual going rate. Credit cards automatically offer great currency conversion rates, and you can always use your phone (or a basic calculator) to convert prices to dollars at the current exchange rate, if that would make international shopping more comfortable for you.