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Cards with no foreign transaction fee cards surge

Fees reduced or waived to lure well-heeled travelers

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Frequent travelers probably know that you can get slammed by foreign transaction fees if you use your credit and debit cards overseas. However, it has become easier to avoid these charges thanks to new chip technology and card issuers' quest to boost their market share.

Once called currency conversion fees, foreign transaction fees tend to range from 1 percent to 3 percent. Credit card holders are typically charged the fee when they purchase items while overseas or when they make purchases that use an overseas bank to process the transaction.

More issuers cutting credit card foreign transaction fees

But increasingly, consumers -- especially wealthy and frequently flying consumers -- see credit card offers that don't charge transaction fees.

Most recently, American Express announced that foreign transaction fees would be waived for its American Express Consumer and Business Delta SkyMiles credit cards starting May 1, 2014. BarclayCard added the Hawaiian Airlines World Elite MasterCard and Business MasterCard to its list of cards with no transaction fees.  HSBC also recently waived foreign transaction fees for all consumer credit cards, says spokesman Neil Brazil.

Some issuers -- including Pentagon Federal Credit Union, Capital One and Discover -- have eliminated foreign transaction fees from all their credit cards. (See chart below to compare credit card issuers' foreign transaction fees.)

Other issuers haven't done away with foreign transaction fees entirely, but deleted them from specific cards. For example, Chase has been steadily increasing its number of offerings, boasting 13 cards that don't charge these fees.

Travelers are also benefiting from the adoption of credit cards using EMV technology, named for Europay, MasterCard and Visa. EMV-enabled credit cards have an embedded microprocessor chip in addition to a magnetic stripe and are used widely overseas. To promote the cards' use among frequent travelers, a number of U.S. issuers are offering EMV-enabled cards that waive all foreign transaction fees.

Bank of America is offering three EMV-enabled travel rewards cards that waive foreign transaction fees: BankAmericard Travel Rewards, BankAmericard Privileges with Travel Rewards and WorldPoints Travel Rewards for Business. U.S. Bank offers the FlexPerks Reserve Visa Card, the SKYPASS Visa Signature and the SKYPASS Visa Business Card, all of which use EMV technology and waive foreign transaction fees.

A play for customers
What's behind all the changes? One driving force is the desire among issuers to stand out from the crowded credit card field. "The decision to eliminate foreign transaction fees provides clear value to our card members, especially at a time when other issuers are tacking on additional fees," says Kathryn Henry, a spokeswoman for Discover.

Others are using the cards to tap into certain segments of the market. "We always want to cement the loyalty of our current customers and capture new ones by offering the best card for affluent travelers," says Desiree C. Fish, a spokeswoman for American Express.

If you don't have one of those cards or one with an EMV chip, not much has changed. "Consumers get whacked by the foreign transaction fees, bank teller fees and cash withdrawal fees every time they take money from a cash machine overseas," says Charles Leocha, publisher of ConsumerTraveler.com.

The root of the costs
For overseas purchases, Visa and MasterCard, which handle transactions between the foreign merchant or bank and the bank that issued your card, typically charge a 1 percent foreign transaction fee. Then, card-issuing banks may tack on their own charges. For example, Wells Fargo card users pay a 1 percent fee that goes to either Visa or MasterCard, along with a 2 percent fee charged by Wells Fargo, bringing the total fee to 3 percent. American Express doesn't use the Visa or MasterCard payment system, but on its fee-charging cards, the company tacks on its own foreign transaction fee, typically 2.7 percent.

I was appalled when I counted up how much I was paying in foreign transaction fees.

-- Mikaya Heart  
Author and frequent traveler  

If you make a lot of purchases, those fees can take a toll on your budget. Mikaya Heart, a life coach and author based in Northern California, spends about eight months out of the year traveling abroad, so she can't avoid spending money while overseas. "I was appalled when I counted up how much I was paying in foreign transaction fees," she says. Since she wasn't ready to give up traveling, Heart checked to see if any of her other cards offered a better deal. Luckily, her Capital One card charged no foreign transaction fees so she uses it whenever she goes abroad.

"I didn't start looking into foreign transaction fees until I realized how much they were costing me," says Heart. "I didn't get a Capital One card for that reason initially, but I certainly would have."

Even if you decide to leave your credit cards home, you may still be socked with fees when you travel overseas. Many banks charge fees for using debit cards or withdrawing cash at foreign ATMs. For example, Wells Fargo charges $5 for using an ATM card abroad. Some banks waive certain fees if you withdraw money from partner bank ATMs. For example, Bank of America generally charges 1 percent plus a $5 fee to withdraw cash from a foreign ATM. However, if you use an ATM at one of the company's Global Alliance Partners, which includes Barclays, Deutsche Bank and China Construction Bank, the $5 fee is waived, says spokeswoman Betty Riess.

Avoiding costly fees
If you plan to travel, you should first check with your bank and credit card issuers to find out what the foreign transaction charges will be, suggests Gregory Karp, author of "Make Your Credit Cards Work for You Instead of You for Them." The information should be disclosed in your card agreements -- a change from the past, when the first time a card user might find out about the fee was when it came in the bill after a trip.

Through a class-action suit, card issuers were punished for failing to disclose the information, with more than 10 million checks going out to credit card holders to compensate them for inadequate disclosures. Most of the checks were sent by January 2012; a related suit regarding American Express customers resulted in the distribution of more than 7.4 million checks to credit card holders by the end of July 2013. See ccfcsettlement.com for more information.

Tips for fee-averse travelers
If you're a frequent traveler abroad, experts suggest that you take action well before the wheels go up on your flight:

  • Know your bank's policy. If you can't readily find information about foreign transaction fees, pick up the phone and call the number on the back of your card.
  • Check to see if your bank is part of a global ATM network that you can use to access your money overseas at a lower cost.
  • If you travel frequently, it may make sense to apply for an EMV-enabled card or one that does not charge transaction fees. For example, credit unions are more likely to cap foreign transaction fees at the 1 percent Visa/MasterCard charge.

 American Express
Issuer fee
2.7%; No transaction fees for the American Express Platinum and American Express Centurion cards, and the Consumer and Business Delta SkyMiles Credit Cards (Gold, Platinum and Reserve).

MasterCard/Visa fee
N/A

Total fee
2.7%; No transaction fees for the American Express Platinum and American Express Centurion cards.

Foreign ATM cost
2.7% foreign currency withdrawal fee except for OPEN and consumer Platinum and Centurion Card accounts.

Bank of America
Issuer fee
2%; No foreign transaction fees on BankAmericard Travel Rewards, BankAmericard Privileges with Travel Rewards and WorldPoints Travel Rewards for Business. Some affinity cards, such as Celebrity Cruise Lines, either have no foreign transaction fee or a reduced fee.

MasterCard/Visa fee
1%; No foreign transaction fees on BankAmericard Travel Rewards, BankAmericard Privileges with Travel Rewards and WorldPoints Travel Rewards for Business. Some affinity cards, such as Celebrity Cruise Lines, either have no foreign transaction fee or a reduced fee.

 

Total fee
3%; No foreign transaction fees on BankAmericard Travel Rewards, BankAmericard Privileges with Travel Rewards and WorldPoints Travel Rewards for Business. Some affinity cards, such as Celebrity Cruise Lines, either have no foreign transaction fee or a reduced fee.

 

Foreign ATM cost
$5 plus 3% currency conversion fee at non-alliance ATMs. $5 is waived and only 3% conversion fee applies for Global ATM Alliance partner ATMs.

BarclayCard/Juniper
Issuer fee
2%; No foreign transaction fees on Barclaycard Arrival or Hawaiian Airlines World Elite and Business MasterCards.

MasterCard/Visa fee
1%; No foreign transaction fees on Barclaycard Arrival or Hawaiian Airlines World Elite and Business MasterCards.

 

Total fee
3%; No foreign transaction fees on Barclaycard Arrival or Hawaiian Airlines World Elite and Business MasterCards.

Foreign ATM cost
3% currency conversion fee

Capital One
Issuer fee
None

MasterCard/Visa fee
None

Total fee
None

Foreign ATM cost
None for retail High Yield Checking and Capital One 360 Checking account holders. For other retail checking account holders, withdrawals from ATMs outside the U.S., Puerto Rico and the U.S. Virgin Islands will incur a 3% transaction fee.

Chase
Issuer fee
2%; No foreign transaction fees for the J.P. Morgan Select Card, J.P. Morgan Palladium Card, Chase Priority Club Select Visa Card, Ink Bold, Ink Plus, Chase Sapphire Preferred, The Hyatt Credit Card, Marriott Rewards Premier Credit Card, British Airways Visa Signature Card, Fairmont Visa Signature Credit Card, Southwest Airlines Rapid Rewards Premier Card , United Mileage Plus Club Visa and the United Mileage Plus Explorer Card.

MasterCard/Visa fee
1%; No foreign transaction fees for the J.P. Morgan Select Card, J.P. Morgan Palladium Card, Chase Priority Club Select Visa Card, Ink Bold, Ink Plus, Chase Sapphire Preferred, The Hyatt Credit Card, Marriott Rewards Premier Credit Card, British Airways Visa Signature Card, Fairmont Visa Signature Credit Card, Southwest Airlines Rapid Rewards Premier Card , United Mileage Plus Club Visa and the United Mileage Plus Explorer Card.

Total fee
3%; No foreign transaction fees for the J.P. Morgan Select Card, J.P. Morgan Palladium Card, Chase Priority Club Select Visa Card, Ink Bold, Ink Plus, Chase Sapphire Preferred, The Hyatt Credit Card, Marriott Rewards Premier Credit Card, British Airways Visa Signature Card, Fairmont Visa Signature Credit Card, Southwest Airlines Rapid Rewards Premier Card , United Mileage Plus Club Visa and the United Mileage Plus Explorer Card.

Foreign ATM cost
$5 plus 3% currency conversion fee; Fees are waived for Chase Private Client customers.

Citi
Issuer fee
2%; No transaction fees for the Citi Executive AAdvantage World Elite MasterCard, the ThankYou Premier card  and the ThankYou Prestige card, and the Citi Hilton HHonors Reserve Card. (ThankYou cards also offer EMV technology.)

MasterCard/Visa fee
1%; no transaction fees for the Citi Executive AAdvantage World Elite MasterCard, the ThankYou Premier card, the ThankYou Prestige card, and the Citi Hilton HHonors Reserve Card. (ThankYou cards also offer EMV technology.)

Total fee
3%; no transaction fees for the Citi Executive AAdvantage World Elite MasterCard, the ThankYou Premier card, the ThankYou Prestige card, and the Citi Hilton HHonors Reserve Card. (ThankYou cards also offer EMV technology.)

Foreign ATM cost
3% currency conversion fee that is waived for Citigold clients.
Discover
Issuer fee
None

MasterCard/Visa fee
None

Total fee
None

Foreign ATM cost
None

HSBC
Issuer fee
None for all consumer credit cards.

MasterCard/Visa fee
None for all consumer credit cards.

Total fee
None for all consumer credit cards.

Foreign ATM cost
No fee for Premier Checking Debit MasterCard; 3 percent foreign transaction fee for international purchases and ATM withdrawals with the HSBC MasterCard Debit Card.

Pentagon Federal Credit Union
Issuer fee
None

MasterCard/Visa fee
None

Total fee
None

Foreign ATM cost
No cost for using credit card to withdraw cash .

USAA
Issuer fee
None

MasterCard/Visa fee
1%;  USAA reimburses foreign transaction fees for all active duty members who have a USAA MasterCard, Visa or American Express credit card and are deployed for up to 12 months.

Total fee
1%;  USAA reimburses foreign transaction fees for all active duty members who have a USAA MasterCard, Visa or American Express credit card and are deployed for up to 12 months.

Foreign ATM cost
Free when using ATMs at U.S. military bases, U.S. embassies and consulates, and U.S. territories. If a member takes a cash advance from an ATM with a USAA credit card, there is a 3% cash advance fee.

Wells Fargo
Issuer fee
2%

MasterCard/Visa fee
1%

Total fee
3%

Foreign ATM cost
$5 withdrawal fee

US Bank

Issuer fee
2% foreign transaction fee for purchases made in U.S. dollars and 3% foreign transaction fee for purchases made in foreign currency
No foreign transaction fees on the FlexPerks Reserve Visa Card, the SKYPASS Visa Signature and the SKYPASS Visa Business Card.

See related: How to save on debit card foreign transaction fees, 6 budget-blowing international travel mistakes to avoid,  Even domestic purchases can trigger foreign transaction fees

Updated: April 25, 2014


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