foreign transaction fee

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This ridiculous fee cost you big, even though it didn't cost your credit card company anything.

Credit card issuers can be very creative — when it comes to dreaming up new fees to charge their customers. Most cardholders face annual fees, late fees, balance transfer fees, cash withdrawal fees, and the most insidious one of all, the foreign transaction fee.

What is a foreign transaction fee?

It’s a fee imposed on all transactions processed outside of the United States. In fact, it’s not a foreign currency conversion fee, as card issuers will add this fee even when you’re overseas but charging in good ol’ U.S. dollars. In addition, you could even find this fee added to your transactions when you complete them at home. If you’re doing business with a foreign company, and they process your transaction outside of the United States, it’ll trigger this fee.

For a long time, nearly all credit cards charged a 3 percent foreign transaction fee, but there have always been exceptions. For example, Capital One, the Discover Card, and the Pentagon Federal Credit Union (PenFed) don’t charge this fee at all.

At the same time, American Express charges its own quirky fee of  2.7 percent, as if to imply that it reflects some actual cost on their end. The truth is, there are no costs incurred when a card issuer processes a transaction outside of the United States. Banks receive the most favorable exchange rates, called the interbank rate, and they’re in the business of exchanging billions of dollars of currency every day. Given this reality, the effort required to process a transaction outside of the United States is that of a simple, mathematical computation, and that’s assuming a foreign currency is involved.

Need more proof? Consider the fact that Canadian American Express cardholders also get charged this fee should they visit the United States! And finally, if the fee represents any real cost, why are there products such as the American Express Platinum  and Delta SkyMiles cards that don’t charge this fee at all?


Now for the good news

I have been covering the credit card industry since 2008, and since then I have seen a steady erosion of cards that have this fee. One by one they have been “waiving” this useless charge, especially on reward cards marketed to international travelers. This is probably since cardholders have become more savvy about which cards they use when they leave the United States, and those with foreign transaction fees have assumed “don’t leave home with it” status.

And it’s not just my anecdotal evidence supporting this trend. BankRate’s division has observed that among all 12 of the largest credit card issuers, 37 percent of credit cards currently offered don’t impose a foreign transaction fee. According to Matt Schulz, senior industry analyst at, “This means many Americans don’t have to settle for paying these unnecessary fees anymore.”  But sadly, their survey also found that 33 percent of credit card holders didn’t know if their card charged foreign transaction fees.

Bottom line

You now have plenty of choices among credit cards that do not charge this ridiculous fee. Be one of the Americans who know if their cards have this fee, and use a fee-free card on your next trip across the border. That way, you can save 3 percent on your purchases, and force the credit card industry to offer something of value in exchange for your money.

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Meet the Author

Jason Steele

Jason Steele


Steele is a freelance writer for and is an expert on credit cards.


credit cards

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