Paying the price for foreign transactions
If you used a credit card in another country over the last year, you may have noticed something new on your monthly bill: a new fee for “foreign transactions”.
On most cards, these fees range from 2% to 3% of the total of all purchases made in other countries. This means cardholders could end up paying an extra $30 on a $1,000 hotel bill or an extra $3 on a $100 meal.
For someone who travels internationally once or twice a year, that amount may seem like little more than a nuisance. But for frequent international business travellers who entertain, stay at hotels, rent cars and shop in other countries, those fees can add up over the course of a year. A frequent traveller who spends $50,000 a year in other countries can end up paying a $1,500 in bank fees.
When the Credit Card Act went into effect in the US last year, it forced banks to show foreign transaction (“forex”) fees as a separate line item on credit card bills. In the past, the fees were bundled into the exchange rate on each transaction and not explicitly shown on statements. So they often went unnoticed.
But now that travellers are noticing the fees (and not liking what they see), credit card companies that market heavily to business travellers are responding by waiving them. Capital One was the first bank to issue credit cards without foreign transaction fees. American Express recently announced that it now waives forex fees for its big-spending platinum and centurion cardholders. Many Chase, Citi and Visa cards affiliated with airline or hotel loyalty programs have done the same. While annual fees for these cards are typically higher than average, the amount saved by avoiding foreign transaction fees may cover the annual one; plus, these cards offer travel perks such as airline club access or credits for airline baggage fees.
So if you are a frequent international traveller, and you want to avoid forex fees, it might be time to take a look at the cards in your wallet and compare offers. Here are a few places to start comparison shopping:
- Card Hub is a website set up to help consumers choose credit cards based on a variety of factors, including the foreign transaction fee.
- Google’s new advisor tool can also help travellers make the best decision.
- The New York Times recently ran a helpful article about credit cards that addresses forex fees.
Chris McGinnis is the business travel columnist for BBC Travel.