What is a Foreign Transaction Fee?
A foreign transaction fee is charged by your bank or credit card issuer when a purchase is processed outside the country or billed in a foreign currency. Typically ranging from 1% to 3% of the transaction amount, this fee is added to the exchange rate and often appears as a separate line item on your credit card statement 
credit card statement, which can make it easy to overlook.
Foreign transaction fees often consist of two parts. One portion should be charged to your card issuer, such as Chase, Capital One, Bank of America, or Citi. The other portion will come from the payment network, including American Express , Discover
, Mastercard
, or Visa
.
Many consumers do not realize this fee can apply even when there is no international travel. You will be charged a foreign transaction fee when shopping on international websites, subscribing to foreign-based services, or purchasing from global marketplaces if a non-U.S. bank processes payment. Even if prices are listed in dollars, the transaction may still be classified as a foreign transaction.
How Do Foreign Transaction Fees Work?
Foreign transaction fees are based on how your payment is processed in the global banking system, not on your physical location. When you use your credit card, the payment is routed through a network like Visa or Mastercard and processed by one or more banks. If any step in this process occurs outside the U.S, your purchase may be treated as a foreign transaction and incur a foreign transaction fee.
Foreign transaction fees may apply under several conditions:
- When you use your credit card while traveling in another country
If you buy something in another country, the payment usually goes through a foreign bank and is processed in a different currency. As a result, your credit card company may treat it as a foreign transaction and charge a fee. - When you shop online inside the country
Even if you’re in the U.S., the store’s payment processor or bank might be in another country. If your payment is routed internationally, your card issuer may still charge a foreign transaction fee, even if the price is in U.S. dollars.
Is Foreign Currency the Same as a Currency Conversion Fee?
Foreign transaction fees and currency conversion fees are separate charges. Card issuers apply foreign transaction fees to purchases made outside the U.S., while currency conversion fees apply when funds are exchanged between currencies. Both fees may apply to a single purchase. For example, if you buy an item in a foreign currency, the card network converts the amount to U.S. dollars, and your bank may add a foreign transaction fee. Some merchants offer payment in your home currency, but this often results in a less favorable exchange rate and additional charges. Understanding these fees can help you save money and make informed payment decisions when shopping or traveling abroad.
Why Can You Be Charged Without Traveling Abroad?
Many assume foreign transaction fees apply only when traveling abroad, but they can also apply to purchases made in the United States.
Foreign transaction fees depend on how your payment is processed, not your location. You might see these fees in situations like:
- Shopping on international websites: Purchases from stores or payment processors outside the U.S. may be processed as international transactions.
- Paying for foreign-based streaming or software subscriptions: Some digital services and cloud platforms bill through companies located outside the U.S., regardless of where you use them.
- Purchasing from global marketplaces: Payments to international sellers may be processed through banks outside the U.S.
- Completing a transaction with a non-U.S. payment processor: Companies using foreign payment systems may classify your purchase as a foreign transaction.
- Paying in a foreign currency, even online: Payments in currencies other than U.S. dollars typically require conversion by your bank, which may result in a fee.
Finsery pro tip
How Much Are Foreign Transaction Fees?
Foreign transaction fees are typically a percentage of what you spend. Most U.S. credit card companies that charge this fee use a rate between 1% and 3%. Even though this may seem small, it applies to every international purchase, so the costs can add up quickly.
Here’s an example to show how foreign transaction fees work with common U.S. credit card companies when the fee applies:
Typical Foreign Transaction Fee Breakdown
| Bank / Card Issuer | Network Fee | Issuer Fee | Total Fee | On $100 Purchase |
|---|---|---|---|---|
| Captial One | - | - | - | - |
| Discover | - | - | - | - |
| American Express | Included | ~2.7% | ~2.7% | $2.7 |
| Bank of America | ~1% | ~2% | ~3% | $3 |
| Chase | ~1% | ~2% | ~3% | $3 |
| Citi | ~1% | ~2% | ~3% | $3 |
| PNC | ~1% | ~2% | ~3% | $3 |
| U.S. Bank | ~1% | ~2% | ~3% | $3 |
How Does This Affect Your Spending?
- If your card has a 3% foreign transaction fee, you will pay an additional $3 for every $100 spent.
- One international trip or a year of online purchases abroad could result in fees of $50 to $100 or more.
- Some credit card companies, like Capital One and Discover, don’t charge foreign transaction fees on any of their cards.
These fees apply only if your card charges a foreign transaction fee. Many banks offer travel or premium cards without this fee, which can help you save money when shopping internationally or traveling abroad.
How to Avoid Foreign Transaction Fees?
If you want to avoid foreign transaction fees, choose a credit card that doesn’t charge them. Many travel and rewards cards skip the usual 1% to 3% fee, so you’ll only pay the exchange rate when you buy something abroad. When you travel, pay in the local currency to avoid extra fees, and limit ATM withdrawals to reduce additional fees. Before your trip, check your card’s fee details so you don’t get any surprise charges and can save money.
To avoid foreign transaction fees, use a credit card that does not charge them. Many travel and rewards cards waive the typical 2% to 3% fee, allowing you to pay only the card network’s exchange rate. These cards usually offer the same rewards, protections, and benefits as standard credit cards. Selecting the right card before you travel can help you save on international purchases.
When shopping abroad, pay in the local currency. This lets Visa or Mastercard convert your funds at a competitive rate. Paying in U.S. dollars can add markups. Using local currency increases price transparency and reduces hidden fees.
Dynamic currency conversion happens when a merchant or ATM offers to charge you in U.S. dollars instead of the local currency. While this may seem convenient, it often includes hidden fees. Declining DCC lets your card network process the exchange at a better rate and helps you avoid extra costs.
Withdrawing cash from foreign ATM’s often results in high foreign transaction fees. To minimize costs, withdraw larger amounts less often and plan withdrawals in advance. When possible, use your card for purchases instead of cash withdrawals.
Some banks offer debit cards that refund international ATM fees, helping you save money when accessing cash abroad. If you travel frequently, these refunds can be significant. Before your trip, check whether your bank provides this benefit.
If you plan to travel or shop in another country, take a moment to check the terms for your credit and debit cards. This way, you’ll know about any fees ahead of time. Some cards have foreign transaction fees, but others don’t. Looking over your options now can help you pick the best card for your trip. Staying informed is a simple way to keep your money safe.
Most of the time, you cannot get foreign transaction fees back because they are built into the card’s terms. But you might get a refund if the fee was charged by mistake, if the purchase was wrongly marked as a foreign transaction, or if your card says it does not have these fees. Always call your card company if you see a charge that should not be there.
Can Foreign Transaction Fees Be Claimed as a Tax Deduction?
Foreign transaction fees usually cannot be deducted for personal expenses. However, you may be able to deduct them if they are for legitimate business purposes tied to earning taxable income.
When foreign transaction fees are not deductible
Foreign transaction fees on personal spending are not deductible under Internal Revenue Service (IRS) guidance. This includes fees from vacation travel, international online shopping, or personal subscriptions to foreign-based services. Since these expenses are not related to income-producing activities, they cannot be deducted.
When foreign transaction fees may be deductible
Foreign transaction fees may be deductible if they are directly related to business activities. Fees incurred when paying foreign vendors, purchasing international software or cloud services for work, or covering business travel expenses in foreign currency may qualify as ordinary and necessary business expenses. Currency exchange fees associated with business payments may also be deductible. These fees are typically recorded as bank fees, merchant processing charges, or travel and operating expenses when filing business taxes.
Important note: Foreign transaction fees do not qualify for the foreign tax credit because they are treated as bank service charges rather than foreign income taxes.
Frequently Asked Questions
Back to topNo, not all credit cards charge foreign transaction fees. Many travel and international credit cards do not charge these fees, including all Discover cards and some Capital One, Chase, and Bank of America cards. If you travel or shop online from other countries, picking cards with no foreign transaction fees helps you avoid paying more.
You may be charged a foreign transaction fee when using your card abroad or buying from international websites and subscriptions processed outside the U.S., even if prices are in U.S. dollars. Sometimes the fee applies because the payment processor is outside the United States.
When you use cards in other countries, credit cards are usually better. They protect you more from fraud, do not take money straight from your bank account, and often do not charge foreign transaction fees. Debit cards may charge these fees, plus extra fees for using ATMs in other countries or banks, so they can cost more when you travel.
Most debit cards charge foreign transaction fees, and these are often higher than the fees for credit cards. Usually, you’ll pay between 1% and 3% for each purchase or cash withdrawal made outside the U.S. or through a foreign bank. If you use an ATM abroad, the operator may charge you $3 to $5, and your bank might also add an out-of-network ATM fee. When you add up these costs, using a debit card overseas can end up being more expensive than using a credit card.
