Foreign Transaction Fees for Credit Cards -- Who's Affected?

In recent years, many Visa and MasterCard issuers have begun to include foreign transaction fees for credit card purchases made beyond U.S. borders. Why on earth would the banks choose to do this? Is it just a way for credit card issuers to make more money? It's a natural reaction, but not correct, given the fact that most card fees generally are levied to offset higher costs experienced by banks and major issuers for various types of transactions.

The more specific answer concerning foreign transaction fees is that there is simply more inherent risk involved in credit card charges that are made overseas. Issues involving incorrect conversion of currency, merchant charge backs, and outright fraud are significantly more common. Therefore, the Visa and MasterCard associations, which are comprised of member banks, have taken the position of passing these costs on to all consumers with foreign transactions. The typical fee is a flat 3% fee based on the total transaction, including foreign sales and value added taxes.

Are the fees here to stay? Since we have seen no indications otherwise, it appears Officials say that the fees have been effective in offsetting their increased costs and are probably a permanent fixture of the Visa and MasterCard pricing policy. But there are alternatives for foreign travelers who currently carry a Visa or MasterCard credit card. One option is to use traveler's checks when visiting a foreign country. Another is to use a prepaid debit card, although there may be acceptance issues relative to credit cards. Travelers should consult the terms and conditions or card member agreement offer their prepaid debit cards to understand potential limitations.

Currently, Capital One does not levy foreign transaction fees. So, if you carry one of their credit cards, you are probably in the clear.

Since American Express built its brand and reputation on international acceptance, travelers shouldn't have any travel-related issues with either an American Express charge or credit card other than the small fees involved. But, as stated before, travelers checks can be a safe bet as well. American Express can also meet vacationer's needs in this area as well in the form with their traditional travelers checks, as well as their recently launched travelers check card (a stored value card version of paper travelers checks).

The bottom line is that for most people, foreign travel is going to be a bit more expensive. There are ways to avoid the majority of these fees, however, if you play your cards right.

Capital One Means No Foreign Transaction Fees

When you swipe your Capital One credit card on a foreign vacation, it won’t cost you a dime to have the amount of your purchase converted into U.S. dollars. That is because unlike most other credit card issuers, Capital One does not charge foreign transaction fees on purchases made overseas.

For lots of vacationers, one of the best things about trips abroad (aside from the chance to see new and exciting places) is the fact that you can sometimes stretch your hard-earned dollars even farther overseas. Favorable exchange rates mean a luxurious getaway does not have to break the bank.

However, for the many travelers who decide to pay for that vacation with a credit card, there are some added expenses they may not expect. Those expenses come in the form of foreign transaction fees levied on credit card purchases made abroad. But for Capital One credit card users who travel overseas, foreign transaction fees are not a worry, since Capital One does not charge foreign transaction fees for its credit cards.

Foreign transaction fees are those fees that many credit card companies add on to the cost of purchases made with your plastic in a foreign country. Credit card issuers add foreign currency transaction fees for the service of translating the cost of a purchase from the foreign currency into the U.S. dollar amount that eventually appears on your credit card bill.

Since Capital One cardholders will not see such fees appear on their credit card bills, they are a good choice for international charges. And, with a Capital One No Hassle Miles Rewards card, your foreign purchases get you closer to your next trip – since every dollar you spend earns you airline miles.

So pack your luggage, bring your guidebooks, and make sure your Capital One credit card is stowed securely in your wallet.