Foreign Transaction Fee On Credit Cards

A foreign transaction fee is a charge a customer incurs while making international transactions. Credit card companies charge this fee, usually up to 3.5% of the transaction amount. It covers the cost of processing international payments and will appear as a separate charge on your credit card statement. This ensures transparency in how banks handle these expenses. The charges may vary from bank to bank.

In addition, FCY conversion markup fees typically range between 2% to 3% of the transaction value. The card network and issuing bank distribute the cost among themselves to the payment processor, Mastercard or Visa, and the issuing bank. Major banks such as HSBC and Bank of America charge around 2.75% to 3% for such transactions. It’s important to check credit card international transaction charges before using your credit card abroad or on international websites.

Top Credit Cards With Foreign Transaction Fee

Many top credit cards in India charge a foreign transaction fee, which varies from one card to another. This fee is typically a percentage of the transaction amount. Here’s a quick overview of some popular credit cards’ foreign transaction charges, including HDFC credit card international transaction charges:

Different Types of Fees on International Transactions

Credit card international transaction charges come in various types and can significantly affect the cost of making or receiving payments across borders. The primary types include:

• Foreign Transaction Fees: These are typically applied by banks or credit card issuers when a transaction is made in a foreign currency. This fee generally ranges from 0% to 3.50% of the transaction amount and is commonly seen on credit and debit card purchases made abroad or online by international merchants​.
• Currency Conversion Fees: A conversion fee is often applied when payments need to be converted from one currency to another. This fee can be around 1% to 3% and is sometimes included within the foreign transaction fee. Dynamic Currency Conversion (DCC) is a related service in which merchants convert the payment to the home currency at the point of sale, often at a less favourable exchange rate, increasing the total cost​.

Calculating Foreign Transaction Fees

The international transaction charges of credit cards are calculated based on the total purchase amount after converting it into the local currency. This fee is then applied as a percentage of the converted amount. For example, if you spend Rs 5,000 in another country and have a 2% foreign transaction fee, you will pay an extra Rs 100. On top of that, there’s also an 18% GST on this fee, adding another Rs 18, making the total additional cost Rs 118. Since different credit cards have different fees, finding a card with low or no foreign transaction fees is a good move.

Here is an example of how you can calculate foreign transaction fees via a fee calculator:

• Foreign Purchase Amount: 200 USD.
• Rate of Exchange: 1 USD = ₹84
• Converted Amount in ₹ : $200 x 84 = ₹16,800
• Fee Percentage: 2%.
• Foreign Transaction Fee Calculation: ₹16,800 x 0.02 = ₹336

Currency Conversion Charges on Credit Cards in India

When you use an Indian credit card for a transaction in a foreign currency, an FCY conversion markup fee is applied. Each time you swipe your card, you may pay a currency conversion fee, which is different from a foreign transaction fee. This fee isn’t charged by your bank or card company but by the payment processor, like Visa or MasterCard, which usually adds 1% to 3% of your spending. The bank then passes this cost on to you, meaning you pay both a foreign transaction fee and a currency conversion fee on each purchase. This fee is often hidden, as it’s included in the foreign transaction charge on your statement, so you need to compare receipts to see how much extra you’re paying.

Credit cards are often a convenient way to make payments when travelling abroad. Many major issuers offer cards that have low FCY conversion markup fees. Most banks now have partner banks in other countries. If you cannot find an ATM from your bank, you can use a partner bank’s ATM to withdraw cash. For example, American Express partners with ICBC, China CITIC Bank, and Shanghai Bank in China. You can use ATMs from these banks. Some places may offer the choice to pay in your home or local currency. Ensure you always pay in the local currency, as paying in your home currency can result in high international transaction charges.

Have a look at some other banks that do not charge any international transaction fees:

• Citibank
• RBL Bank
• AXIS Bank
• Capital One

Using Credit Card Abroad With No Charges

When travelling abroad, avoid extra costs by using a credit card with no foreign transaction fees. Apply for one a few months before your trip to allow time for approval, setup, and delivery. Credit card international transaction charges can add up quickly, so a card without these charges helps you shop overseas without extra charges. Always pay in the local currency to avoid high dynamic currency conversion fees. You can also consider a prepaid travel card, which lets you load multiple currencies and spend without fees. These options can help you enjoy a more affordable travel experience.