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How to avoid foreign currency fees when traveling
Avoid foreign transaction fees to save more on your next trip.
Using a credit card while traveling overseas may be convenient, but it can get quite costly when you factor in rates and fees. Learning how to get ideal rates and avoid unnecessary costs — including currency exchange fees and foreign transaction fees — can go a long way toward saving you cash.
How can you avoid travel money fees?
Traveling can be expensive, and fees can accumulate quickly. Here are a few ways to save on your next trip.
No-foreign-transaction-fee credit cards
These cards advertise no fees when you use your card for overseas purchases. You may pay a slightly higher annual fee for this type of credit card, but the money you’ll save on overseas spending might balance that out if you often travel.
Using debit cards
Most U.S. debit cards will charge foreign currency exchange fees when used overseas. To save costs on your next holiday, look for a debit card with low or no foreign transaction fees. Unlike a credit card, debit card transactions don’t incur interest and you can withdraw funds without being charged a cash advance fee. If your card belongs to an international ATM alliance, you can also save on ATM withdrawal costs.
Airline credit cards
Rewards are typically more expensive when it comes to annual fees and interest rates, but you can find some with no foreign transaction fees. If you’re usually able to repay your balance each month, a rewards credit card with no foreign transaction fees could be a great way to get rewarded for your holiday expenses.
Compare rewards credit cards here
Using local currency
Carrying the local currency in cash is another way you can avoid foreign transaction fees on day-to-day holiday expenses. It’s not exactly safe to carry all of your travel budget in cash, though, so look for a card that has low ATM withdrawal fees such as Capital One 360 or Charles Schwab Investor Checking.
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How do travel rates and fees for credit cards work?
When spending abroad with your credit card, you may encounter foreign transaction fees and currency conversion fees.
- Foreign transaction fee.
Your card provider may charge this on each overseas transaction. This is typically 3% of the transaction amount, and it can amount to hundreds of dollars if you consistently swipe your card for big-ticket items. - Currency conversion costs.
When you use your card abroad, the merchant might ask if you want to pay in the local currency or US dollars. The latter option is called dynamic currency conversion (DCC). If you opt for it, your purchase amount will be converted at the exchange rate set by the merchant’s DCC provider. This rate may be much worse than the market rate, however, which means you’re effectively paying an extra fee.
Luckily, you can avoid these fees. It’s all about choosing the right product for travel spending. You can compare some of your options below.
What are the other costs and features to consider?
Even if your travel money card or strategy helps you avoid currency conversion fees, there are still other costs and factors to consider. When you’re comparing your travel money options, keep the following in mind as well:
- ATM fees. If you’re not careful, you could end up paying fees twice for using an overseas ATM. Unless your bank has a global ATM alliance that allows you to make international withdrawals for free, you could be charged by your bank and the ATM owner for withdrawals.
- Annual fee. Some credit cards — especially the best travel products — have annual fees. If you don’t want to pay an upfront fee for your card, or you don’t think you’ll earn enough rewards to justify the cost, consider a no-annual-fee card. You’ll find many options with no annual fees or foreign transaction fees.
- Supported currencies and global acceptance. Make sure the card you’re using will work at your vacation destination. Make sure your credit card is accepted worldwide, as you can expect with a Visa or Mastercard. If you’re using a travel money card, make sure it supports the local currency you’ll be using or doesn’t charge a currency conversion fee.
- Merchant fees. You might find in some places that the merchant adds a surcharge to your transaction for using a foreign credit card. Check your bill before paying to avoid that fee wherever possible, and to have alternative payment methods on hand in those events.
- Exchange rates. Check to see how often exchange rates are updated and if there are additional fees for currency conversion. A good way to avoid negative exchange rate movements is to lock in the rates with a travel money card.
- Additional travel perks. Complimentary travel insurance, 24/7 global emergency customer service line and frequent-flyer rewards programs could offer added value to your card.
Bottom line
How often you travel, the length of your stay and the way you spend money abroad can all factor into the type of credit, debit or travel card you choose to use abroad. Consider your typical expenses and everyday spending when choosing a travel credit card that will offer you the most value.
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