There are two components of a foreign currency exchange fee with your credit card. The first is a fee assessed by the credit card brand, and the second is a fee assessed by the holding bank or institution.
For example, if your credit union says that they do not charge a fee for foreign purchase, you need to realize this does not mean you will not pay a fee. As a standard practice, Visa and Mastercard charge a 1% fee for exchanging foreign currency. Thus, if you used your credit union Visa overseas, you could expect to pay 1% even if the bank does not charge a fee.
American Express will list your purchased item and record the price in the foreign currency. They will then convert that amount using the Foreign Currency conversion rate (it is the purchase price plus 2.7%). This has not always been the case. In fact, there have been many class action lawsuits against companies who did not disclose their foreign currency fees. The advantage for you, the consumer, is that it will be easier to find the best credit card for overseas purchases. The best credit card is one that has a 0% foreign currency exchange fee.
Best Credit Card Acceptance Overseas
While this is certainly not a scientific finding, I have found in my travels overseas that Visa and MasterCard are by far the most frequently accepted cards. American Express is not accepted as frequently, and Discover has the least flexibility.
Remember that credit card usage is not as common in many other countries. You will need to research before you leave to see if your destination frequently uses credit cards. If not, you will need to find another way to get the cheapest foreign currency exchange.
Best 0% Foreign Exchange Fee Credit Cards
Chase Sapphire Preferred
The Chase Sapphire Preferred card is a solid all around credit card. It consistently has one of the best sign up bonsuses (50,000 points worth $625 worth of travel). It offers 2 points per dollar spend on travel and dining out. It gives 1 point per dollar on everything else. And for the sake of this article - it doesn’t charge a foreign currency fee. If I were on the market for a 0% foreign currency exchange credit card this one would be on the top of my list. This card does some with a $95 annual fee (waived for the first year).
Capital One Credit Card
- 0% foreign currency exchange
- 2% cash back on all purchases (in the form of Venture Rewards miles)
- Flexibility of locations with Visa name
- Capital One has a very sensitive fraud monitoring feature. This makes it essential that you contact them before every trip overseas and provide your details.
- Capital One has strict credit requirements, so not everyone is eligible.
- Typically, they offer low credit limits which might be less than ideal for an overseas trip.
- $59 annual fee
Schwab Credit Card
Updated 4/27/10: The Schwab card is no longer available for new card members. Current members will continue to enjoy the same benefits … until further notice. I guess the Captial One Card is the only option.
- No charge at all for using the card overseas. They also assume the 1% fee.
- No annual fee
- 2% cash back on purchases
- Accepted at many locations – Visa
- Must also have a brokerage account with Schwab
Worst Foreign Exchange Currency Fees
Typically, you cannot get any worse than 3%. 3% is typical for a card that you do not specifically purchase for foreign use.
Should You Change Credit Cards Just For One International Vacation?
It completely depends on how much you intend to spend. Let’s say it is a two week vacation in Europe. You might just drop $3,000. With your 3% fee credit card, you would pay $90 in foreign exchange fees. If, however, you had a 1% cash back Capital One card with 0% foreign exchange fees, you would get $30 in cash back. This represents a $120 difference.
If you do have a high foreign currency charge, consider purchasing as many of your items in US dollars as possible. Use a site like Hotwire where you are required to prepay in US dollars. This is better than booking travel in the foreign country.
Call your credit card and ask them what the foreign currency conversion fee is, or you can see a comparison of many different exchange fees.
If you don’t plan to use a credit card, you should still know the best way to exchange foreign currency.
Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.