Credit cards can make travel easier and simpler. But when traveling abroad, the last thing you need is an unexpected credit card fee. Foreign transaction and currency conversion fees are common fees you might encounter while traveling. In this article, we’ll look at these fees, why you might encounter them and what you can do to avoid them.
What is a foreign transaction fee?
A foreign transaction fee is an amount your credit card issuer charges on a transaction with a merchant outside your home country. It's meant to cover the costs associated with processing international transactions. These fees are usually charged as a percentage of the overall transaction. A typical foreign transaction fee might be between 1% and 3% of your total purchase, though some credit card issuers charge higher amounts.
Ways to avoid paying foreign transaction fees
Using cash instead of credit cards can help you save on foreign transaction fees. However, not all credit cards have foreign transaction fees, so if you frequently travel abroad or make purchases from international merchants, it's worth considering a card that doesn't charge these fees.
Many cards designed for frequent travelers, including the Citi® / AAdvantage® Platinum Select® World Elite Mastercard® and Citi Strata Premier® Card, don’t charge foreign transaction fees. This and other perks may make these cards ideal for you if you frequently use credit cards abroad.
What are currency conversion fees?
A currency conversion fee is an amount you’re charged to convert a transaction from one currency to another.
When traveling, you may encounter the option to convert the local currency to your home currency at the point of sale. While it can be convenient to know exactly how much you’ll be charged in your home currency, this comes with a currency conversion fee. A currency conversion fee may also be built into your foreign transaction fee.
This fee is typically 1% but can vary. If you’re planning a trip, check your credit card agreement or contact your card issuer to determine under what circumstances you’d be charged a conversion fee.
Ways to avoid paying currency conversion fees
Paying cash is a good way to avoid currency conversion fees. Exchanging currency at your local bank before you leave for your trip can allow you to obtain cash without paying conversion fees.
However, credit cards can be more secure than cash. If your Citi credit card is lost or stolen during your trip, you won’t be responsible for any unauthorized charges. If you’d rather use your credit card abroad, you can avoid currency conversion fees by using a card that doesn’t charge a foreign transaction fee and completing the transaction in the local currency rather than converting the transaction to your home country’s currency. Simply select the local currency on the payment terminal whenever you use your credit card, and your transaction will be processed without converting the local currency to that of your home country.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
