What the fee is
The official commentary to Regulation Z, the federal rule for credit cards, treats any charge for a purchase or cash advance outside the United States, with a foreign merchant, or in a foreign currency as a finance charge. It names three kinds of transactions that count:
- Transactions made in a foreign currency and converted to US dollars.
- Transactions made in US dollars outside the United States.
- Transactions with a foreign merchant, in dollars or a foreign currency, for example through the merchant's website.
The third point surprises people. You can pay a foreign transaction fee without leaving home, when an online shop is based abroad. The second explains why choosing to pay in dollars at a terminal abroad does not by itself avoid the fee.
Online orders from home
Because a foreign merchant alone can trigger the fee, it can show up on a statement for a purchase you made on your couch. Say you order a $180 item from a shop based abroad and the checkout shows the price in dollars. If your card charges the commentary's example of 3 percent on transactions with foreign merchants, the statement shows a fee of $5.40 next to the purchase. The fee comes from your card's terms, not from the shop, so the first statement after an order is the place to check for it. On orders you place often, the fee adds up the same way it does on a trip: $64.80 a year for one such order a month.
Network and issuer: two parts, one fee
A card payment passes through a card network on its way to the bank that issued your card. Both can charge for a foreign transaction. The Regulation Z commentary gives its own example: the network may impose a 1 percent charge and the card-issuing bank an additional 2 percent, for a total of 3 percentage points charged to you. Whether your card charges one part, both or neither depends on its terms.
The fee is separate from the exchange rate used to convert a foreign currency amount into dollars. The guide to the mid-market exchange rate explains how to check the conversion part.
Where to find your rate
The fee is listed in your card agreement. The CFPB keeps a database of credit card agreements from hundreds of card issuers, searchable by issuer, which is useful when you no longer have the paperwork. For a prepaid card, the CFPB notes that a foreign transaction fee is usually a percentage of the purchase, withdrawal or other transaction rather than a flat amount. Check before a trip, not after: if your everyday card charges the fee and another card you hold does not, the choice of card alone saves the whole fee.
What the fee costs
The fee is a straight percentage, so the cost grows in line with what you spend. The table shows the fee on card spending from $500 to $5,000 at three example rates.
| Spending | At 1% | At 2% | At 3% |
|---|---|---|---|
| $500 | $5.00 | $10.00 | $15.00 |
| $1,000 | $10.00 | $20.00 | $30.00 |
| $1,500 | $15.00 | $30.00 | $45.00 |
| $2,000 | $20.00 | $40.00 | $60.00 |
| $2,500 | $25.00 | $50.00 | $75.00 |
| $3,000 | $30.00 | $60.00 | $90.00 |
| $4,000 | $40.00 | $80.00 | $120.00 |
| $5,000 | $50.00 | $100.00 | $150.00 |
At 3 percent, a $5,000 trip costs $150.00 in fees alone. The percentage calculator works it out for any other amount or rate.
ATM withdrawals abroad
Cash from an ATM abroad can carry more than one charge. The CFPB notes that both your bank or credit union and the owner of the ATM can charge you a fee. Abroad, a percentage fee from your card can come on top of those:
- The ATM owner's fee. A charge set by whoever runs the machine.
- Your bank's fee for using another bank's ATM, as listed in your account terms.
- A foreign transaction fee as a percentage of the withdrawal, if your card charges one.
With a credit card, cash from an ATM is a cash advance. The Regulation Z commentary includes cash advances outside the United States in the same foreign transaction fee rules as purchases. Check the cash advance terms in your agreement before using a credit card for cash.
Because some ATM fees are flat per withdrawal, fewer and larger withdrawals spread them over more cash. A $5 fee on $250 is 2.0 percent; on $500 it is 1.0 percent. A machine that offers to convert the withdrawal into dollars for you is a separate choice with its own rate; see dynamic currency conversion before you accept.
A trip, worked through
Ten days abroad with $2,400 of card purchases and 4 ATM withdrawals of $250 each. The card charges the commentary's example of 3 percent on both; each ATM owner charges an example fee of $5.
| Item | Cost |
|---|---|
| 3% on $2,400 of purchases | $72.00 |
| 3% on $1,000 of withdrawals | $30.00 |
| ATM owner fees, 4 × $5 | $20.00 |
| Total fees | $122.00 |
With a card that charges no foreign transaction fee, the same trip costs $20.00 in ATM owner fees, a difference of $102.00. Add the fees to the trip plan in the travel budget calculator, and use the currency converter to turn local prices into dollars before you add the percentage.
Before you travel
- Find the foreign transaction fee in each card's agreement, for purchases and for cash.
- Put the card with the lowest fee first in your wallet for the trip.
- Check your bank's fee for other banks' ATMs, and plan fewer, larger withdrawals if the fees are flat.
- Remember online orders from shops based abroad: the same fee can apply at home.
- When a terminal or ATM offers to charge you in dollars, compare its rate before you accept.
Large amounts of cash have their own rules at the border; the guide to how much cash you can travel with covers the reporting limits.
Frequently asked questions
What is a foreign transaction fee?
It is a charge your card issuer adds when you make a purchase or get a cash advance outside the United States, with a foreign merchant, or in a foreign currency. It is usually a percentage of the transaction. The official commentary to Regulation Z treats it as a finance charge on a credit card.
Can I be charged a foreign transaction fee when I pay in dollars?
Yes, if your card charges one. The Regulation Z commentary lists fees on transactions made in US dollars outside the United States, and on transactions with a foreign merchant, such as through its website, whether in dollars or a foreign currency. Paying in dollars changes the conversion, not necessarily the fee.
How much is a typical foreign transaction fee?
Your card agreement sets the rate, so check it there. The Regulation Z commentary uses an example of 3 percentage points in total: 1 percent charged by the card network and 2 percent by the issuing bank.
Do I pay a foreign transaction fee at an ATM abroad?
You can. The CFPB notes that both your bank and the owner of the ATM can charge you a fee, and a foreign transaction fee on a prepaid card is usually a percentage of a purchase or a withdrawal. On a credit card, a cash advance taken outside the United States falls under the same foreign transaction fee rules as a purchase.
Where do I find my card fees?
In your card agreement and its fee table. The CFPB also keeps a database of credit card agreements from hundreds of card issuers, searchable by issuer, built from its most recent quarterly collection.
Sources
- CFPB: Official interpretation of Regulation Z, § 1026.4 Finance charge, comment 4(a)-4 (foreign transaction fees are finance charges; the three kinds of transactions included; the 1 percent network plus 2 percent issuer example)
- CFPB: What types of fees do prepaid cards typically charge? (a foreign transaction fee is usually a percentage of a purchase, withdrawal or other transaction; in-network and out-of-network ATM fees)
- CFPB: Can my bank or credit union charge me a fee to use another bank's ATM? (both your bank and the ATM owner can charge a fee)
- CFPB: Credit card agreement database (agreements from hundreds of card issuers, searchable by issuer, from the most recent quarterly collection)
General information based on the sources above, not tax, legal or financial advice.