What Are eCommerce Foreign Transaction Fees And How To Avoid It
Foreign transaction fees are a fact of life for anyone who has used their credit card outside of the United States.
This is known as hidden fees, often buried in the fine print of your credit card contract.
You might ask: What are these transaction fees, and do they vary from card to card?
We’ve explained the nitty gritty details in this article and help you avoid it.
What is a foreign transaction fee, And How is It calculated?
A foreign transaction fee is a charge on your credit card bill for purchases that pass through a foreign bank or are conducted in a currency other than the U.S. dollar.
Many credit card providers charge this fee (which can range from 1% to 3% of the purchase).
The foreign transaction fee is made up of 2 components:
1) Currency Conversion Fee
The whole transaction is rounded up to the nearest cent, and y the credit card network (Visa or Mastercard charges this portion of the FX feed). They both charge a fee of 1%.
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2) Issuing bank fee
Some credit card companies tack on a premium to the network charge, usually around 2%.
Some don’t add their own and go as far as absorbing the cost, so you won’t have to pay anything.
Note: Foreign transaction fees are sometimes charged as a single charge to your credit card statement per purchase, even though the price has two parts. The bank determines these charges.
How are foreign transaction fees calculated?
If you’re going on vacation to Italy and pay €82 with a MasterCard network card, you’ll be charged a 2% issuing bank fee.
Using the exchange rate, this equals $100 in USD.
Mastercard will charge 1% on top of the cost of your room based on that amount. The lender will charge another 2%.
As a result, your hotel’s actual cost is ($100 * (1% + 2%)) + $100 = $103.
This doesn’t sound too much, but you may pay an extra 1% to 3% in fees on each purchase — which can soon mount up if you make numerous purchases or spend time away frequently.
Remember that foreign exchange rates affect most international transactions. You won’t be charged $20 for breakfast if you’re charged €20.
The amount in euros will be converted to dollars using the current exchange rate.
All foreign currency transactions are converted to USD using MasterCard and Visa’s designated rates.
After currency conversion has been completed, foreign transaction costs are incurred.
Some sellers will ask whether you want to be charged in USD upfront via dynamic currency conversion — we discourage this.
Knowing the total cost in USD may be a good idea, but dynamic currency conversion is frequently coupled with a worse exchange rate.
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PayPal & Stripe Foreign Transaction Fees
Stripe allows you to process payments in over 135 different currencies, allowing you to charge clients in their money while receiving funds in yours.
If your online business has a global presence, accepting payments in their home currency might encourage consumers to make additional purchases.
The cost of foreign stripe transactions may vary depending on the payment method. There is a 1% currency conversion fee for international payment methods and a 1.5 per cent service fee.
When using PayPal for international, there is a 5.00% fee regardless of the amount you send or receive. When paying with a PayPal balance, bank account, or card.
The maximum international fee for PayPal is $4.99, while the minimum international price is $0.99.
How To Avoid Foreign Transaction Fees
The most common way to avoid foreign transaction fees is to utilize a card that doesn’t charge one.
That said, there are 5 things you may do to prevent these expenses:
1) Open a Credit Card That Doesn’t Have a Foreign Transaction Fee
Several credit cards do not charge foreign transaction fees. None of the capital one consumer cards charges this fee, and many popular travel credit cards do not.
Some credit cards also provide additional perks that can be useful while travelling.
You may also get a statement credit to reimburse you for the cost of Global entry, allowing you to breeze through airport security lines quickly. However, the card’s $550 annual fee might be tough to justify unless you’re a frequent flier.
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Which credit cards have no foreign transaction fees?
Numerous credit cards waive foreign transaction fees as a perk, and most of these are travel credit cards.
Many co-branded hotel and airline cards do not charge foreign transaction fees, while premium travel rewards like travel rewards cards with high annual fees usually do not.
Let’s look at 3 of the best credit cards that don’t charge foreign transaction fees:
| Card | Earning rate | Annual fee |
| Capital One Venture Rewards Credit Card | 2 Miles per dollar on every purchase, every day | $95 |
| Chase Sapphire Preferred® Card | 5x on travel purchased through Chase Ultimate Rewards®, 3x on dining and 2x on all other travel purchases | $95 |
| Capital One VentureOne Rewards Credit Card | 1.25 Miles per dollar on every purchase, every day | $0 |
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2) Create a Bank Account That Does Not Charge Foreign Fees
Not paying foreign transaction fees with a credit card can help you save money.
On the other hand, some merchants may charge you additional if you use a credit card, or they may not take them at all.
If you’re planning to leave the United States, be sure your bank charges any additional costs when you’re outside the country.
If you make a foreign charge, fees may be levied on your debit card. You could avoid these by following the instructions correctly if you do it right the first time.
The Charles Schwab Bank High Yield Investor Checking account is popular since it has no account minimums or foreign transaction costs. Charles Schwab reimburses all worldwide ATM expenses.
If you don’t want to create a new bank account for travelling, see if your bank has branches or partner banks in other countries.
You may withdraw money from ATMs at those locations for free.
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3) Keep an eye on conversion and transaction costs
Fees for international transactions can take many forms and differ depending on the currency you’re paying in and where you’re buying.
There are also costs associated with currency conversion, which payment networks, banks, ATM operators, and retailers may charge.
These are price markups on the conversion rate that is frequently unavoidable.
But don’t panic; There are ways to minimize them.
Several credit and debit cards may charge foreign transaction fees.
The cost is incurred whenever you pay in another currency or when a foreign bank handles your transaction.
You may be charged a foreign transaction fee if you purchase online while in the United States or abroad, even if you’re paying with U.S. dollars.
You might be fined if you buy anything using a currency other than the U.S. dollar online in the United States.
However, if you use a card that does not have the fee (like the cards we mentioned above), you can avoid these costs easily.
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4) Exchange your money for the local currency Before You Leave
To avoid expenses, go to your bank in the United States before you leave and exchange your money for the local currency in your destination.
You may find that your bank or credit union charges a low (or no) foreign exchange fee, making it an excellent place to change money.
Exchanging your money at an airport or other port of entry when you travel may be inconvenient.
However, having some money set aside when you arrive might be beneficial, and you’ll probably save a lot of money compared to changing currency at a terminal or other border crossing.
5) Don’t Pay With The U.S. Dollar
They might inquire if you want to pay in the local currency or U.S. dollars when you pay with a card.
It may appear the opposite, but paying in a foreign currency is frequently the superior choice.
You can find out how much it will cost to purchase an item in another currency online by viewing Google’s currency converter.
You may also compare the conversion costs for various payment networks to help you decide whether to use their service or go through with your planned transaction using the Money Transfer Service calculator.
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Credit card issuer foreign transaction fees
Exchange fees differ from one card provider to the next.
This rate might also vary depending on the credit card from the same bank.
The table below summarizes typical foreign transaction fees and cards from that bank with no F.X. costs if you’re searching for a different option.
In addition to offering non-FX-charging options, each primary lender has at least one:
| The Provider | Foreign transaction fees |
| Bank of America | 3% |
| Barclays | 3% |
| Capital One | 0% |
| American Express | 2.70% |
| Chase | 3% |
| U.S. Bank | Up to 3% |
How to Recognize Foreign Transaction Fees on Your Credit Card
Unless a product lacks these costs, Credit card issuers usually don’t advertise that their cards charge foreign transaction fees.
If you can’t find “no foreign transaction fees” advertised as a benefit for a card product, it’s safe to assume the card will charge an F.X. fee.
Your foreign transaction fees will look like this:
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When are foreign transaction fees incurred?
If a transaction passes through a foreign bank, the credit card companies consider it “foreign.”
You don’t have to live outside the United States when you purchase (For example, if you have an international eCommerce store).
Foreign transaction fees may apply to specific transactions, such as those completed in a different currency with an international vendor.
Even if your transaction is completed in USD and travels through the United States.
You could be charged a foreign transaction fee if:
- A transaction takes place with a vendor located outside of the United States.
- A transaction involving a foreign currency has occurred.
- A transaction is transferred through a foreign bank.
Note: A foreign transaction fee is a fee your credit card company charges when you purchase something in another country, even if the transaction appears to be made in U.S. dollars. Some countries (such as Panama and Ecuador) use the dollar as their money.
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What Should You Do if you are Overwhelmed? (Which is not your fault)
As your company grows, the issues you face with foreign transaction fees become increasingly complicated.
When you reach this stage, you must hand over control to the specialists so they can assist you in growing your online business while keeping your focus on your business growth only.
Here at Free cash flow help online businesses (like yours) boost their revenue and do what other firms miss.
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FAQ
What is a Foreign Transaction Fees ?
A foreign transaction fee is a charge on your credit card bill for making purchases that pass through a foreign bank or are conducted in a currency other than the US dollar.
Many credit card providers charge this fee (which can range from 1% to 3% of the purchase).
How do I avoid foreign transaction fees?
1) Open a Credit Card That Doesn’t Have a Foreign Transaction Fee.
2) Create a Bank Account That Does Not Charge Foreign Fees.
3) Keep an eye on conversion and transaction costs.
4) Exchange your money for the local currency Before You Leave.
5) Don’t Pay With The US Dollar.
What are the reasons for foreign transaction fees at banks?
When you make a purchase that goes through an overseas bank to process the transaction, certain cards charge foreign transaction fees.
Banks may have to convert the purchase into US dollars when you make a transaction while traveling or on a non-U.S. website.
Is there a transaction fee for international online purchases?
Yes, foreign transaction fees are incurred whenever a merchant’s headquarters is outside of the United States. This applies to debit cards and credit cards as well.
Is there a foreign transaction fee refund?
It depending on the issuer, Because the card issuer needed to make currency market purchases to process your card purchase and incur a cost to service your needs, you should anticipate that foreign transaction fees will not be reimbursed.
Does stripe/PayPal charge Foreign international fees?
Stripe and PayPal both charge a 2.9 percent + $0.30 fee on every online transaction for international sales, as Stripe charges 1%, plus an extra variable fee dependent on the currency received, whereas PayPal charges 4.4 percent per transaction with another set fixed cost that varies by currency.
