No foreign transaction fee credit cards do not charge you an additional fee for making purchases in a foreign currency.
Considering the fee on foreign currency transactions is typically 2-3% of the amount spent, shopping while overseas can come with a costly surprise when the statement arrives. It's also easy to rack up currency conversion fees shopping online from stores based overseas or who charge in a foreign currency.
David Boyd, co-founder of Credit Card Compare, explains, "Credit card foreign transaction fees can sneak up when you least expect them. For example, you may be shopping online without realising the store charges from an overseas entity. A credit card with no foreign transaction fee means you don't have to worry about this kind of nasty surprise appearing on your statement."
Key features of no foreign transaction fee credit cards
- Savings on transaction fees: One of the primary reasons to opt for a no foreign transaction fee credit card is the potential savings. With these cards, you avoid additional charges that typically range between 1% and 3% of the transaction amount for purchases made in a foreign currency. Over time, these savings can accumulate, making a notable difference in your overall expenses.
- Convenient international use: No foreign transaction fee credit cards are convenient for international travellers and for online shoppers. Travellers don't need to carry local currency and deal with currency conversion, both of which contribute to a hassle-free payment experience wherever you go. Additionally, these cards offer the flexibility to transact in various currencies without worrying about hidden fees.
How no foreign transaction fee credit cards work
No foreign transaction fee credit cards operate in the same way as standard credit cards. If you were to lay a credit card with no foreign transaction fee beside one that does charge a fee on foreign currency conversions, there would be no way to discern the difference visually.
Although there is no additional fee on currency conversions, the bank's currency conversion rate may not be as competitive as the mid-market rate.
This type of card is particularly useful for international travellers, frequent flyers and shoppers who regularly deal with overseas merchants.
What to consider when choosing a no foreign transaction fee credit card
- Rewards program: Consider whether the card offers rewards points, cashback, or other incentives for your spending. Consider how these rewards align with your needs and preferences. If you're travelling a lot, find out what their overseas earn rate is — it's often higher than it is for domestic spend.
- Annual fees: While some no foreign transaction fee credit cards may have no annual fees, others do. Cards with no annual fee and no foreign currency conversion fee are not particularly uncommon.
- Interest rates: Pay attention to the interest rates of these cards, especially if you plan to carry a balance. Look for competitive rates that suit your financial situation.
- Additional benefits: Given the travel focus, pay attention to other travel-centric features such as travel insurance and airport lounge access.
