When you’re travelling internationally or shopping online with overseas retailers, you may be subject to a fee on every credit card purchase you make. Known as a foreign transaction fee, this fee increases the cost of using your credit card on international purchases without providing any extra benefits. However, using a no-foreign-transaction-fee credit card can eliminate this extra fee and save you hundreds of dollars in the long run.
By choosing the right credit card with no foreign transaction fees, you could save on foreign transaction and ATM withdrawal fees and enjoy features such as credit card travel insurance, reward points, or access to airport lounges. Use our guide to compare your options and find the right no-foreign-transaction-fee credit card for you.
Compare cards with no foreign transaction fees
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What is a foreign transaction exchange rate?
A foreign exchange rate, also commonly referred to as a forex rate, is the cost to convert a charge on your credit card from your local currency to another country’s currency.
For example, if you travel from Canada to Germany and use your credit card to purchase a meal, the charge will be converted from Canadian dollars to euros. The number of euros you get will depend on the foreign exchange rate between these two currencies at the time of purchase. If the exchange rate is 0.67, then you’ll get 0.67 euro for every $1 Canadian dollar that you exchange. The foreign exchange rate differs from currency to currency and fluctuates frequently.
When you use your credit card overseas or make purchases online in a foreign currency, the exchange rate offered by your credit card provider is applied on top of the exchange rate conversion — a transaction fee that is typically 2.5% of the transaction amount. Foreign transaction fees can be avoided by using a credit card that charges no foreign transaction fees.
What is a no foreign transaction fee credit card?
A no foreign transaction fee credit card is one that doesn’t charge a foreign transaction fee on purchases you make with international businesses. Using a no-foreign transaction fee credit card when you’re travelling (or shopping online with international retailers) can save you hundreds of dollars in additional fees (over the lifetime of credit card use).
What’s great about a no foreign transaction fee is that the savings are automatic. You don’t have to make any redemption or take extra steps to have the foreign transaction fee waived; the fee simply isn’t charged to you at all.
Why would I want to avoid a foreign transaction fee?
A foreign transaction fee is usually a percentage – normally 2.5% – of the transaction in Canadian dollars. It’s charged whenever you make a purchase from a company located in another country or a business that uses a credit card processor that’s located outside of Canada. This means the fee can be charged when you travel abroad and use your credit card overseas or when you simply shop online with an international retailer from the comfort of your own home.
Foreign transaction fees aren’t based on the type of currency and might be charged even when the purchase is made in Canadian dollars (such as shopping online with an international retailer or opting to pay in CAD when prompted on a debit/credit machine overseas). The 2.5% fee may not sound like much, but it’s $3.75 on a $150 transaction. If you go on a vacation and spend $5,000, that’s $125 in foreign transaction fees.
How to choose a no foreign transaction fee credit card
The lack of a foreign transaction fee itself is a great perk, but it’s not the only thing that matters in a credit card. As you consider no foreign transaction fee credit cards, check out the other features of the credit card to choose the best one for you.
Annual fee. While you avoid foreign transaction fees, you may want to minimize your credit card costs by avoiding annual fees. Some no-foreign-transaction-fee credit cards charge annual fees. Before you choose a card with an annual fee, make sure the benefits are worth the additional cost.
APR. The annual percentage rate (APR) on a credit card influences how much interest you pay whenever you do not pay your balance in full. If you carry a balance, a lower APR will minimize the amount you pay on balances you carry.
Promotional rates. No-foreign-transaction-fee credit card vs. using cash Some no-foreign-transaction-fee credit cards offer 0% introductory interest rates on balance transfers or purchases, or both, for a limited period of time. You’ll pay no interest during the promotional period as long as you make your payments on time. With a low promotional rate, you can use your credit card to book a trip and make purchases while you’re travelling at no interest and with no foreign transaction fee. Consider also the length of the promotional rate and the interest rate after the promotion ends.
Rewards. No foreign transaction fee credit cards commonly pay rewards that you can use toward future travel. With a credit card that pays rewards, pay close attention to the rewards you earn for each dollar you spend. Look for a credit card that pays the most rewards in the categories where you typically spend the most money. Be sure also that the rewards you earn are rewards you can use.
Signup bonus. Many rewards credit cards offer a sign-up bonus, which is a lump sum of rewards that you can earn by spending a certain amount of money within the first few months of having the credit card. Compare signup bonuses based on the amount of the bonus you can earn and the amount you have to spend to earn the bonus. Keep in mind that your spending habits and credit limit will influence your ability to meet the spending requirement.
Security features. Many credit cards now feature safer EMV chip technology, which makes it more difficult to copy or duplicate the credit card. Fortunately, many foreign countries already accept EMV chip credit cards. Look for a no foreign transaction fee credit card with EMV chip technology for safer transactions when you’re travelling abroad.
International credit card acceptance. Don’t take for granted that your card will be accepted while you’re travelling to other countries. Visa and Mastercards are widely accepted worldwide. However, Discover and American Express are not as widely accepted in other countries. Consider where you’re likely to travel and research to learn whether the credit card network is widely accepted in that country.
Other credit card perks. Many no-foreign-transaction-fee credit cards include other travel perks. These perks can make the credit card even more worth using. Benefits like travel insurance, waived baggage fees, or priority boarding are things that you should consider when you’re choosing a no-foreign-transaction-fee credit card. Read the fine print of these perks to be sure they continue to apply when you travel internationally.
No-foreign-transaction-fee credit card vs using cash
You might wonder if it’s easier to carry cash as a way to avoid paying foreign transaction fees. While cash is universal and many currency exchange providers around the world accept Canadian dollars, a credit card is often a better choice. You should carry at least some cash for smaller purchases, but a credit card is a better option for the majority of your purchases.
Cash can get lost or stolen. Carrying cash is risky because of the increased presence of pickpockets. This is especially common in tourist-heavy areas of the world. If your cash is lost or stolen, you can’t recoup your funds. On the other hand, your credit card issuer likely has a zero fraud liability policy that will eliminate your responsibility for charges made on a stolen credit card.
Declaring cash. Carrying cash can make travelling more cumbersome, depending on the amount you’re carrying. Some countries will require you to make a declaration if you carry cash through customs over a certain amount. Failing to declare your cash can result in stiff penalties. You don’t face the same requirements if you carry a credit card.
When withdrawing cash from an ATM, always use your debit card. Using a credit card to withdraw cash from an ATM can get incredibly expensive. You’ll have to pay an ATM fee, a cash advance fee, and you’ll start accruing interest on the withdrawal right away.
Drawbacks of no foreign transaction fee credit cards
While the ability to avoid paying a foreign transaction fee is attractive to many credit card users, there are some drawbacks.
There’s a very limited number of credit cards to choose from. There are plenty of credit cards on the market, but only a small number of them are no foreign transaction fee credit cards. This means that you only have a select number of credit cards to choose from.
They may not offer the best rewards. If you’re looking for a no foreign transaction fee credit card to double as your main rewards credit card, you may not be happy about your options. Many credit cards that fit this category require lots of spending to provide noticeable benefits.
You may still pay fees. While a no-foreign-transaction-fee credit card lets you avoid paying foreign transaction fees, that doesn’t mean that you are exempt from other fees. You can end up paying an annual fee, late fee or transactional fees like a cash advance fee on the credit card. Make sure you’re aware of the fees your credit card charges and what you need to do to avoid paying these fees if you want to keep your credit card as close to free as possible.
How to choose the best credit card for overseas travel
Most major banks and credit unions offer credit cards specifically designed for overseas travel. With a large range of travel cards on the market, here are some of the features you should compare to find the right one for you:
International acceptance
In your hunt for a credit card to use overseas, one of the first features to consider is international acceptance. Credit cards with affiliation to Visa or Mastercard are accepted in most countries around the world, at ATMs and credit machine terminals alike. Acceptance of American Express cards is not as widespread, and their use could attract higher fees or no use at all. Make sure the card that you’re using isn’t restricted to the country you plan to travel to.
Credit card fees
Before selecting a credit card, it’s important to understand how much your card could cost you. Consider the following fees when comparing travel credit cards:
When you make an international purchase using your card, your Canadian dollars are converted to the local currency. When this happens, you’re usually charged a conversion fee between 2-3%. If you want to avoid this fee each time you make a transaction overseas, consider a credit card that doesn’t charge a foreign currency conversion fee.
If you have a card that’s designed for overseas use and it comes with extra features, it’s likely that it could also come with a higher annual fee. Before you apply, make sure the value you get from the card outweighs the cost. Some cards also come with no annual fees for a specified promotional period or for the life of the card, so you should also factor this into your comparison.
If you use your credit card to withdraw funds overseas, you might be charged a few different fees. Firstly, most credit cards charge a cash advance fee when you use your card for ATM withdrawals (whether you’re in Canada or overseas). As well as the cash advance fee, you’ll attract the cash advance interest rate, which is charged immediately. Secondly, many banks charge an overseas ATM withdrawal fee when using your card for withdrawals outside of Canada. Thirdly, the local ATM provider might also charge a withdrawal fee. If you want to avoid this last fee, consider using a credit card that belongs to an ATM alliance.
Complimentary insurance
If you’re travelling overseas, you’re going to have to look into getting international travel insurance. Using a credit card that offers complimentary insurance can help you save the time and money you’d otherwise spend on standalone travel insurance coverage. Depending on the card, the complimentary travel insurance usually includes overseas medical insurance, transit accident insurance and travel delay insurance, to name a few. The coverage might also extend to your spouse or any dependent children travelling with you. As well as travel insurance, some credit cards offer purchase security insurance and extended warranty — which extends the warranty on goods you purchase, such as laptops or TVs. so you can shop with extra peace of mind. Complimentary insurance is often a feature of platinum credit cards, so make sure the feature is worth the cost of the card before applying.
Travel rewards
Using a travel rewards credit card is an easy way to earn reward points — that can be used to defer travel-related costs or to purchase consumer goods. If your card is designed for overseas use, you could earn more points on foreign purchases. Compare travel rewards credit cards with no foreign transaction fees to earn points without paying any extra costs for using the card overseas.
What to look our for when using a credit card overseas?
Adding funds to your credit card. Some travellers add funds to their credit cards accounts before they travel overseas, and they then make use of these funds through their card in the form of a debit card. By doing this, you can avoid paying interest. However, when you do this, credit card providers don’t take any responsibility for funds you add to your credit card account. So, if your card is lost or stolen and used for unauthorized transactions, you likely won’t be protected the same way you are if you used the card as a credit card.
Consider other options. Using your credit card is not the only way you can spend money overseas. You can use traveller’s cheques, travel money cards and you can even use a Mastercard or Visa debit card. In fact, it’s wise to organize more than one travel money option before leaving for your trip to ensure you’re not stranded without cash in case your card is lost or stolen.
Excessive debt. A credit card may tempt you to overspend while on vacation. It’s important to remember that you have to repay everything you purchase using your card (plus interest if you don’t pay it back on time), so make sure that you’re spending with a budget in mind so that your balance doesn’t get out of control.
Pros and cons of using a credit card overseas
Pros
Global acceptance. If you’re using a Mastercard or Visa credit card, you’ll be able to use your credit card in millions of locations around the world. American Express cards are also accepted worldwide, although in much fewer places than Visa or Mastercard.
Travel perks. Credit cards designed for overseas use often come with travel-related benefits such as travel points rewards programs, complimentary insurance, concierge services and airline lounge passes.
Security of credit. When you’re travelling overseas, it’s wise to have more than one way to access your cash. Even if you have a prepaid card or debit card organized for everyday spending, a credit card can be used as a backup in case of an emergency.
Cons
Fees. Depending on the card, using your credit card overseas can come with many costs. Make sure you understand exactly what you’ll pay when using your card for foreign transactions before you swipe it.
Limitations. Some cards come with limitations, including eligibility requirements and restrictions on how and where you can use the card.
Temptation to spend. While a line of credit can provide you with peace of mind, it might also tempt you to spend money that you don’t really have. Remember that you’ll have to pay back everything you purchase (plus interest if you don’t pay your balance in full).
The best credit card you can use overseas is one that suits your spending needs and unique financial situation. Given the many options on offer in the marketplace, you should take some time to compare different cards in order to find the best one for your needs.
No foreign transaction fee credit cards FAQs
If a credit card doesn't charge a foreign transaction fee, you can be sure that the credit card issuer markets this benefit prominently in its credit card offers. You can also check the credit card pricing disclosure to find out whether a card issuer charges a foreign transaction fee – it's usually located under the "Other fees" section. If you have trouble locating the foreign transaction fee for a credit card, call the credit card issuer to find out whether the card charges a foreign transaction fee or not.
Before you travel internationally, give your credit card issuer a call to let them know that you're going to be making purchases in other countries. This way your credit card issuer won't flag your international purchases as fraud.
Your credit card issuer is allowed to change the terms of your credit card. This includes adding a foreign transaction fee. Fortunately, the credit card issuer isn't allowed to change the terms of the credit card without letting you know first.
If the credit card issuer decides to add a foreign transaction fee, you should receive a notification from the credit card issuer 45 days before the change is effective. You should also be given a chance to opt out of the change in terms, meaning that you reject the addition of a foreign transaction fee to your credit card. In response, your credit card issuer may decide to cancel your credit card account. You'll be allowed to pay off your balance under the current terms, but you won't be allowed to make additional purchases. If this happens to you, start looking for another no foreign transaction fee credit card.
There is no limit to the number of no foreign transaction fee credit cards you can have. You may choose to have multiple no foreign transaction fee credit cards to increase your spending ability or to take advantage of different rewards programs. As long as you meet the credit requirements, you can have as many no foreign transaction fee credit cards as you can be approved for. Be careful when you have multiple credit cards that you don't get into more debt than you can handle.
There are several different no foreign transaction fee credit cards that you can apply for. You will typically need to have good to excellent credit to qualify for one of these credit cards, however some providers may offer credit cards to those with fair credit. The better your credit score, the more likely it is that you can qualify for a no foreign transaction fee credit card that has great perks and rewards.
With a no foreign transaction fee credit card, you may be subject to other fees that are typical with a credit card. You may pay an annual fee, particularly if this card is a top tier rewards credit card. You are also subject to a late fee if you make your monthly payment after the due date, a balance transfer fee if you transfer a balance to the credit card, and a cash advance fee if you use your credit card to get cash or as overdraft protection for your checking account. Besides the annual fee, most other credit card fees can be avoided depending on how you use your credit card.
Emma Balmforth is a producer at Finder. She is passionate about helping people make financial decisions that will benefit them now and in the future. She has written for a variety of publications including World Nomads, Trek Effect and Uncharted. Emma has a degree in Business and Psychology from the University of Waterloo. She enjoys backpacking, reading and taking long hikes and road trips with her adventurous dog.
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