NOTE: Updated results can be found here.
As many of us have learned from personal experience, your credit card company can make a killing off of your purchases overseas. What do I mean? When using your credit card internationally, your network (MasterCard, Visa, Discover and American Express) will add a 1% foreign currency conversion fee to all transactions you make. This is included in the 2-3% fee most US banks tack on, and for obvious reasons, very few banks will offer anything less than 1%. Want to know what your network is charging you? Keep reading.
What are you being charged?
Here are current foreign transaction fees for some of the largest US card issuers:
| Issuer | Foreign Transaction Fee |
|---|---|
| American Express | 2.7% |
| Bank of America | 3% |
| Barclays | 3% |
| Capital One | 0% |
| Chase | 3% * |
| Citibank | 3% |
| Discover | 2% |
| Fidelity’s American Express | 1% |
| Fifth Third Bank | 3% |
| Pentagon Federal Credit Union | 2% (0% for Promise and Travel Rewards Amex) |
| HSBC | 3%* (0% for Premier) |
| PNC | 3%* |
| Schwab | 0% |
| US Bank | 3% |
| USAA | 1% |
| Wells Fargo | 3% |
| Zion’s Bank | 2% |
Tired of paying these foreign transaction fees? There are a few solutions: Capital One, Schwab, and PenFed. All 3 claim to offer no foreign transaction fees, effectively eating the 1% fee charged by Visa or Mastercard. While we’re not suggesting everyone go out and sign up for a new card right now, if you’re a frequent overseas traveler, you may want to consider getting a no or low foreign transaction fee card before your next trip.
The Exchange Rate Matters Too
Keep in mind, your credit card company also has the freedom to charge you an unfavorable exchange rate, in addition to the foreign transaction fee. American Express has a reputation for giving cardholders favorable exchange rates, despite their 2.7% fee, so in theory you could actually end up paying more using Capital One. NerdWallet is working on an “Around the World” report (Update: You can read it here) where we charge the same item using several different cards in several different countries to see where things really shake out.
Go for Local Currency
One last piece of advice. When making a purchase overseas, make sure you’re charged in the local currency. Often, foreign merchants will offer to charge you in U.S. dollars instead of the local currency. While this may seem easier, some merchants have been known to wait three-or-four days for the highest exchange rate.
* While HSBC and Chase offer lower charges to a small number of “premier” customers, the majority of their cards charge 3%.
UPDATE: The recently-announced PenFed Promise card promises no fees on anything, which also means no foreign transaction fees.