I received a question the other day about foreign transaction fees on credit cards, which I also refer to as “because they can” fees. These fees are just what they sound like: if you make a purchase abroad (or purchase from a merchant located abroad), they will charge you an extra 1-3% for the privilege. You can call them whatever you want, “currency conversion fees,” “foreign exchange fees,” etc. The processors (Visa and MasterCard) charge a fee to the bank who issued your card, which that bank may or may not pass it on to you. Or they could pass it on to you and throw an additional fee on top of it. Because they can.
The plus side is that these fees have been reasonably well publicized recently, so many card companies have backed off (or never had them in the first place). In particular, Capital One and Discover have few, if any, cards with foreign transaction fees. Added bonus: the Discover It Miles card, which has very few fees at all, is currently paying the highest rate of cash back, with a one-year offer of 3% cash back on everything you buy.
The rest of the banks have a mixed record. Chase and Citibank have gotten better, particularly on their high-end cards. Chase is the largest provider of travel loyalty cards among the airlines and hotels, and to their credit, most of the cards involving credit are starting to waive the transaction fees. American Express has always been stingy, although the Gold and Platinum cards waive the fee, and the Starwood American Express will soon begin waiving it. And even Bank of America, one of the last holdouts, is waiving fees on its new Travel Rewards card.
Bottom line: If you travel abroad, you need at least one card with no fees. It’s always nice to have a second, in case your first card is not compatible with overseas terminals. To avoid those issues, let your card company know that you’ll be out of the country. There’s not much you can do about the security technology, as Europe moves to a “chip and PIN” system, but US card vendors are beginning to issue cards with magnetic chips in them. It’s a start.
Edited to Update
A reader pointed out that I should have actually mentioned which cards qualify. Absolutely correct. Thus, I’m adding a list of some of the better cards that are no transaction fee. It’s not 100% of the cards out there, but it does list the ones that have better benefits. On that note, you rarely need to trade benefits for NTF. Almost every issuer has at least one, and many of the best rewards cards offer no foreign transaction fee as a perk.
Capital One and Discover: Congratulations, no foreign transaction fee on any of these cards. Capital One has a couple 2% back cards, and the Venture Rewards card comes with a $400 sign-up bonus. The Discover It Miles card, which has nothing to do with miles, offers 3% back on all purchases for the first year. The Discover card is the one I’d sign up for if I were getting any card today.
American Express: Nobody does a better job of telling you your value by the color of your credit card than American Express. General rule of thumb, at least as it pertains to your foreign transaction fee. If it’s Black or Platinum, it will be NTF. The Delta and Premier Rewards Gold are also fee-free (Thanks to the reader who reminded me of this change.). One of my favorites, the Starwood card (a lovely shade of maroon), will soon be waiving the foreign exchange fee. Green, plum or, heaven forbid, no color at all? It will cost you 2.7% to go internationally.
Bank of America: The pickings are few and far between, although the Travel Reward Credit Card offers the best permanent cash bonus, assuming you have a large balance there.
Barclays: There are not a lot of great Barclays cards, but there is one that stands out, the Barclays Arrivals cards, particularly the Arrivals Plus World Elite Mastercard. There’s a $400 sign-up bonus and 2% on all purchases, with a 10% bonus if you use your points to pay travel expenses. I don’t offer this card on my site, but you can get it directly from Barclays here. I don’t have this card, as I have a very similar Cap One Venture card, but it is an excellent card.
Chase: Chase is the largest issuer of gift cards with travel partners, and it does a good job of offering travel cards with no transaction fees. Among the airlines, you have British Airways (There will be a longer post on the use of British Airways miles sometime soon.), Southwest and United. For hotels, you have Marriott. The proprietary Chase Sapphire Preferred, which is a favorite of some bloggers, has a good sign-up bonus ($400-500, depending on how you us it), but its rewards after that are only average.
Citibank: Mixed. To their credit, Citi has gotten a lot better recently when it comes to fees and the foreign transaction fees have been eliminated on a number of cards. They’ve also increased the value of Thank You points, with points being much more valuable when used for travel. Prestige and Premier are two of my favorite cards, and I have written a number of posts about the Prestige card, which I think has the best travel benefits, period. Both cards are NTF, although the no annual fee version, Preferred, still has a foreign transaction fee. The Premier card is a happy medium, as it waives the annual fee for the first year but still has a 50,000 point sign-up bonus. If you want a card for a particular travel partner, Hilton or American, you’re going to have to get the expensive version. Only AA’s $450 Executive World Elite MC and Hilton’s $95 Reserve card waive the fee.Want to subscribe? Just enter your email in the box above (and to the right) and click on the confirmation. GMailers, check your Social or Promotions boxes!
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