What Is a Foreign Transaction Fee on a Credit Card?

A foreign transaction fee is a charge some credit cards add when a purchase is processed outside the United States or involves a foreign currency. The fee can make international purchases more expensive, even when you are shopping online from home. Understanding when the fee applies can help you choose the right card for travel and international purchases.

How Does a Foreign Transaction Fee Work?

When a transaction qualifies as foreign, the card issuer may charge a percentage of the purchase amount as a foreign transaction fee. The exact fee depends on the card’s terms. For example, if a card charged a 3% foreign transaction fee, a $1,000 qualifying purchase would add $30 in fees.

Can You Be Charged a Foreign Transaction Fee While in the U.S.?

Yes. You do not necessarily have to travel outside the United States to encounter a foreign transaction fee. An online purchase from an international merchant may qualify depending on how and where the transaction is processed and your card’s terms. Check your card agreement if you frequently shop with merchants based outside the U.S.

Do All Credit Cards Charge Foreign Transaction Fees?

No. Some credit cards charge a foreign transaction fee, while others do not. Cards designed for travelers commonly advertise no foreign transaction fees, but you should still verify the card’s current terms before applying. If you travel internationally or frequently buy from overseas merchants, avoiding this fee could reduce your overall card costs.

How Much Can Foreign Transaction Fees Cost?

The cost depends on the fee percentage and how much you spend. For example, a 3% foreign transaction fee would add $15 to $500 in qualifying purchases, $30 to $1,000 and $90 to $3,000. Individually the charges may seem small, but they can add up quickly during an international trip or with frequent overseas purchases.

Foreign Transaction Fee vs. Currency Conversion Fee

A foreign transaction fee and a currency conversion charge are not necessarily the same thing. Your card issuer may charge a foreign transaction fee based on the transaction, while currency conversion involves converting the purchase from one currency to another. Depending on how you pay, additional conversion costs or exchange-rate differences may also apply.

Should You Pay in U.S. Dollars or Local Currency?

When traveling, a merchant or ATM may offer to convert a transaction into U.S. dollars for you. This is often called dynamic currency conversion. The exchange rate or fees associated with that conversion may be less favorable than allowing your card network to process the transaction in the local currency. Review the amount and conversion terms before choosing.

Is a Card With No Foreign Transaction Fee Worth It?

If you travel internationally or regularly make purchases from foreign merchants, a card with no foreign transaction fee can potentially save you money. But consider the entire card—not just this one feature. Compare the annual fee, APR, rewards and other benefits to determine whether the card makes sense for how you expect to use it.

Do Foreign Transaction Fees Affect Rewards?

Foreign transaction fees can reduce the value of rewards you earn on international purchases. For example, earning 2% in rewards on a purchase while paying a 3% foreign transaction fee could leave you behind before considering any other costs. Compare the rewards you expect to earn with the fees you may pay.

How Can You Avoid Foreign Transaction Fees?

One of the simplest ways to avoid foreign transaction fees is to use a credit card that does not charge them. Before traveling or making an international purchase, check your card’s current fee schedule. Also remember that avoiding a foreign transaction fee does not necessarily eliminate currency conversion costs or other charges associated with the transaction.

Don’t Forget the Other Credit Card Fees

Foreign transaction fees are only one potential cost. Annual fees, balance transfer fees, cash advance fees and interest charges can also affect the overall value of a card. Comparing all of these costs together gives you a better picture of what a credit card may actually cost.

See our guide to credit card fees to watch out for for a broader look at common card costs

The Bottom Line

A foreign transaction fee can increase the cost of international purchases, whether you are traveling abroad or buying from certain foreign merchants online. If international spending is common for you, compare cards that do not charge this fee—but also consider the annual fee, APR, rewards and other costs before deciding which card provides the better overall value.