As the world becomes more globalised and we travel abroad more frequently, it is essential to have a credit card that is equipped to handle foreign transactions. However, it is important to be aware of foreign transaction fees on credit cards, which can add up over time. This article covers everything you need to know about international fees, foreign exchange fees, international transaction charges, and more levied on a credit card.
What is a foreign transaction fee?
A foreign transaction fee is a charge imposed by credit card issuers when you purchase in a currency other than the one in which your card is denominated. In simpler terms, it is the cost you pay for the convenience of using your credit card overseas.
How much is a foreign transaction fee?
Different credit cards come with varying foreign transaction fees, and some offer zero forex markup as a credit card benefit. This means that these credit cards do not charge any additional fee on top of the foreign exchange rate, providing a cost-effective solution for international transactions.
Benefits & Features of a Zero Forex Markup Credit Card
A Zero Forex Markup Credit Card eliminates foreign transaction fees, making it ideal for international travellers. It allows you to save on every overseas purchase while offering features like rewards, global acceptance, and additional travel benefits.
How does the foreign transaction fee work?
When you purchase in a foreign currency using your credit card, the transaction amount is converted from the foreign currency to your card's native currency. The foreign transaction fee is then applied as a percentage of the converted amount. For instance, if you make a purchase of £100 (Rs. 10,495) with a credit card having a 3.5% foreign transaction fee, you will be charged an additional £3.50 (Rs. 367.35).
What is a currency conversion fee?
Apart from the foreign transaction fee, it is crucial to understand the currency conversion fee, which may also be applicable. This fee is levied by the payment network (Visa, Mastercard, etc.) and is separate from the foreign transaction fee imposed by your credit card issuer.
What is the difference between a currency conversion fee and a foreign transaction fee?
A currency conversion fee is a charge imposed by credit card networks (for example, Visa and Mastercard) for converting transactions from a foreign currency to the card's native currency. It typically ranges from 1% to 3% of the transaction amount. In contrast, a foreign transaction fee is levied by the credit card issuer when making purchases in a currency different from the card's denomination. It is a percentage of the transaction amount and covers the cost of processing international transactions. While both fees relate to global spending, the currency conversion fee specifically pertains to the conversion process, while the foreign transaction fee encompasses overall international transaction costs.
Conclusion
To summarise, when it comes to foreign transaction fees on credit cards, you should do your research and pick a card that suits your international spending needs. While some credit cards offer zero forex markup, others can charge up to 3% for foreign transactions.
Additionally, currency conversion fees can add up over time, so it is important to understand the fees involved before using your credit card abroad. Always research the fees and terms associated with your credit card before using it for foreign transactions to avoid any surprises on your bill.