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Accessing your money overseas — whether it’s online shopping at a foreign store from home or withdrawing cash at an overseas ATM — can get pricey. Familiarize yourself with the fees you could be facing, and consider switching to a more competitive checking account with no foreign transaction fee if the costs are starting to add up.
A foreign transaction fee, also called an FX fee, is charged to your account when a currency conversion takes place. For example, if you buy something online from Canada and your bank needs to process the payment in CAD instead of USD, it’ll charge you a fee for making this exchange. Although foreign transaction fees vary by institution, they’re usually around 3%.
If you’re stuck paying a foreign transaction fee when you swipe your card, here are a few ways to avoid them:
Checking accounts with debit cards geared toward users who make foreign transactions generally include features such as:
In addition to foreign transaction fees, look out for the following when traveling abroad:
Some banks will charge you a fee as high as $5 or more for using a foreign ATM, which you’ll have to pay on top of the fee you’re charged from the ATM provider. These fees can be charged any time you use an ATM, including to withdraw money, transfer money or just check your balance.
To save on these fees or sidestep them completely, you can:
Currency conversion fees are charged each time you make a transaction where the bank needs to convert your money into a different currency. Most banks will charge currency conversion fees as a percentage of the amount you withdraw or spend. These fees can be charged on their own if you’re shopping online at a foreign store or purchasing something in person while traveling.
They can also be added on top of ATM fees if you withdraw money while out of the country. Most banks charge around 3% for using a foreign currency, but accounts geared towards travelers can sometimes come with lower or no conversion fees.
You can miss this fee completely by using a credit or debit card — like the Capital One 360 debit card — that waives the currency conversion fee.
Another way to avoid this fee is to use a prepaid travel card and preload the foreign currency you’re planning to spend (see what happens when your prepaid card doesn’t support the local currency).
Banks also make money by adding a margin on top of the real exchange rate when transferring one currency into another. For example, if US$1 is currently worth EUR€0.88, your bank might exchange your money at US$1 = EUR€0.87 and keep the difference. While this cost is not as transparent, if your bank is offering a poor exchange rate you could be losing money when using your debit card overseas.
If you know your bank has a poor foreign exchange rate, consider a travel card that locks in the exchange rate when you load money on the card. Alternatively, credit cards generally use the daily interbank exchange rate, which may be more favorable than your bank’s rate with the margin.
If you need to send money to someone overseas, your bank can charge you an international money transfer fee on top of the currency conversion fee and exchange rate margin, which can get pricey. These often cost around $15 to $45 at major banks.
The best way to reduce these fees is to find a debit card that allows you to transfer money to partner banks in various countries for a small charge. Online-only and international banks generally have lower international wire transfer fees than US-only banks.
This steep fee, plus interest, is charged by credit card companies each time you make an ATM withdrawal with your credit card.
It’s simple: Avoid this by not making cash withdrawals on your credit card. Instead, pack a prepaid travel card or debit card that you can use for overseas withdrawals.
A foreign transaction fee isn’t the only debit card issue to be concerned about. If you’re a frequent traveler or you regularly use foreign currencies, you may want to consider:
Foreign transaction fees can get pricey, especially when they’re being charged on top of each other. For example, if you withdraw money at a foreign ATM, you can be charged an ATM fee, currency conversion fee and exchange rate markup. To make sure you’re getting the best deal, compare checking accounts to find one with a debit card that works for both your domestic and international purchases.
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