Foreign transaction fees for credit cards:who's affected?

See newer story: More issuers offer credit cards with no foreign transaction fee

In recent years, many Visa and MasterCard issuers have begun to include foreign transaction fees -- sometimes called currency conversion fees -- for credit card purchases made beyond U.S. borders. 

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The banks say 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 percent 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 travelers' 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 a Capital One card, 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.

See related: Top issuer's foreign transaction fees

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Updated: 08-17-2018