How International Transaction Fees are Incurred

There are a number of ways that foreign or international transaction fees can be charged to your credit card. They are also incurred any time you make a domestic transaction that involves a foreign bank. Bear this in mind and do the necessary research to avoid these additional fees.

Making a purchase when traveling abroad

The most obvious way foreign transaction fees are incurred is when you make a purchase with your credit card while traveling abroad. Suppose you buy a pair of shoes in Germany for 100 Euros with your credit card. The credit card company then converts the purchase amount from Euros to dollars, based on what the conversion rate was at the time of the transaction. If the Euro was worth $1.35, then you’ll be billed $135 US dollars. In addition, you’ll also be billed at whatever the foreign transaction rate is for your credit card. If your credit card has a foreign transaction rate of 3%, then you’ll be billed an additional 3% of the $135 amount, which comes out to a $4.05 foreign transaction fee.

Purchasing an online subscription

Another less obvious way that a foreign transaction fee can get charged to your credit cards is when you use your credit card to pay for an internet subscription. Often, the payment processors of these subscriptions are based overseas. These fees are generally not near as costly as the ones you get from overseas purchases, but they are less obvious. Furthermore, they can really add up for subscriptions that automatically renew on a monthly basis.

Purchasing airline tickets on an airline based in a foreign country

This is, perhaps, the most unscrupulous method example of how credit card holders are fleeced by foreign transaction fees. Many international travelers use their credit cards to purchase airline tickets in the United States with an airline that is based in a foreign country. They never even leave the country, and the entire transaction is completed in US dollars. Still, however, the bank issuing the credit card will charge a foreign transaction fee for the purchase. You, the unwitting travel, who paid $1000 U.S. dollars for an airline ticket and didn’t even leave the United States just got billed an additional $30 foreign transaction fee. How this is even legal is beyond me.

The good news here is that more and more people are getting fed up with these types of outrageous fees, and more and more credit card companies are offering no foreign transaction fee credit cards. Therefore, you now have some good alternatives to getting fleeced by your credit card company by all of the scenarios mentioned above.