Guides · Travel
Foreign transaction fees can cancel out your rewards
2 min read
A card that's great at home can cost you money abroad. The difference is usually a single line in its fee table.
What the fee is
Many credit cards charge a foreign transaction fee, often around 3% of the purchase, when a transaction is processed outside the United States. It can apply even when you're at home, for example when you buy online from a merchant based in another country, and even when the price is shown in dollars.
The math
On a $300 hotel bill abroad, a card that earns 1.5% back but charges a 3% fee gives you $4.50 in rewards and costs you $9.00 in fees: a net loss of $4.50. A card with no foreign transaction fee that earns the same 1.5% leaves you $4.50 ahead. Same purchase, $9 apart.
Before you travel
- Check each card's fee table. Look for “foreign transaction fee” in the card's pricing terms. Many travel-focused cards charge none.
- Pay in the local currency. If a terminal or website offers to charge you in dollars, decline. That conversion, called dynamic currency conversion, usually comes with a worse exchange rate.
- Watch online purchases. A foreign-based merchant can trigger the fee even when you never leave home.
- Set your travel card as the default before you go. It's easy to reach for your everyday card out of habit.