If you’ve been planning on going abroad – whether for a short holiday or backpacking across Europe – one thing that will surely have crossed your mind is how you’ll manage your money while overseas.
With so many options available, you may wonder which option is the best. Do you withdraw cash from a local ATM before going abroad or use an international ATM in the airport? What about your credit card or debit card – and how much would using them abroad cost?
Banking with a financial institution that doesn’t charge foreign transaction fees might be your best option. We will also help you discover other effective ways to avoid foreign transaction fees.
What are Foreign Transaction Fees?
Generally speaking, foreign transaction fees are levied when paying a foreign merchant or withdrawing money from a foreign ATM using either a credit card or a debit card. You will typically pay foreign transaction fees when transacting in currencies other than the U.S. dollar.
Usually, the bank charges these fees as a percentage of the amount withdrawn. Banks charge this fee to cover costs associated with international transactions. As such, you pay more money the more you withdraw. Typically, this is between 1% and 3%; however, this is not a rule, and different banks may charge different amounts.
While such a low percentage may not seem like much, it adds up.
These charges are different than the fees levied when using an out-of-network ATM. It’s important to note that ATM fees are still likely to apply. Other fees, such as currency conversion fees, may also apply, racking up substantially over time.
Banks With No Foreign Transaction Fees
Choosing a bank with no foreign transaction fees is what this article is all about. And this is for a good reason. You do not have to worry about carrying large amounts of cash, nor do you have to worry that merchants may have inflated the exchange rate with a solid international bank account.
A bank with no foreign transaction fees will not charge you for transacting in a currency other than U.S. dollars or with a foreign merchant. As such, you can withdraw money from a foreign ATM or shop without paying the transaction charge. It’s important to note that other fees may still apply – but you could save a fee of between 1% and 3% of the transaction amount!
7 Banks with No Foreign Transaction Fees
Here are the top 7 banks that don’t charge foreign transaction fees:
1. Bank of America
Bank of America offers all the banking products and services you might expect from one of the biggest banks in the U.S.; it’s a true one-stop-shop solution.
They have quite a few credit cards to choose from, with the Bank of America® Travel Rewards card being one with no foreign transaction fees. The card includes 1.5X points per dollar spent, 0% introductory APR, and 25,000 bonus points, among other things. The card also has no annual fee.
Unfortunately, Bank of America does not offer a debit card with no foreign transaction fees. It currently charges 3% of the U.S. Dollar amount (or equivalent if you pay in a foreign currency). You can expect this fee when paying a foreign merchant, regardless of whether you pay in dollars or the merchant’s currency.
2. Capital One
Capital One has a reputation for being tech-focused, but with over 700 branches and 2,000 ATMs in the U.S., this national bank has a good reach if you prefer face-to-face banking.
Capital One’s 360 Checking account comes with a debit card that does not charge foreign transaction fees.
If you choose to pay in foreign currency, Mastercard calculates the actual exchange rate. It uses the wholesale rate (or government-mandated rate) to work out the actual exchange rate. The applicable rate is worked out on the processing date, which may differ from the purchasing and posting dates.
If you prefer a credit card, you will find plenty of options at Capital One. The Capital One® VentureOne® card is one of the available options offering no foreign transaction fees or annual fees.
You’ll also earn 1.25 miles for every dollar spent, while eligible purchases made through Capital One Travel will earn you five miles.
The purchase rate is a variable APR rate of 28.49%, and you’ll need a minimum good credit level to qualify for this card.
Chase, short for JP Morgan Chase, is the largest bank in the U.S. It has a sizeable global presence and operates in over 100 countries, making it a multinational bank.
The bank offers quite a few different checking accounts – all of which come in at different price points and with different perks. As such, you’ll find some accounts charge a foreign transaction fee while others do not. For example, Chase Total Checking charges 3%, while Chase Premier Plus Checking does not.
You will need to be careful which account you go for if you want a debit card with no foreign transaction fee.
Chase also offers several credit cards with a range of terms. Chase Sapphire Preferred® and Chase Sapphire Reserve® are both cards that do not charge foreign transaction fees. The Sapphire Preferred has a yearly fee of $95, while Sapphire Reserve has a yearly fee of $550. Both cards include new member offers and additional features and perks.
Citibank is a U.S. bank with operations in several countries. In the U.S., it operates several locations in nine states. It is a full-service bank offering the full suite of financial products and services you can find at any major bank.
Citibank offers three debit cards with no foreign transaction fees that are tied to their range of premium checking accounts. All but one have no monthly fees however require substantial deposits to qualify.
On the other hand, the Citi Priority Account has a monthly fee of $30. This fee is waived for an average of $30,000 across eligible accounts.
In addition, Citibank also offers a selection of credit cards that do not charge foreign transaction fees. One such example is the Citi Premier® Credit Card. This card has no foreign transaction fees, while the annual fee is $95. New customers get 80,000 bonus points and pay no annual fee when spending $4,000 in the first three months of account opening.
5. Charles Schwab Bank
Charles Schwab is a U.S. financial services and brokerage firm. Although it’s small in physical size, it is the 7th largest bank in the U.S. when compared by the size of assets.
Charles Schwab Bank’s Schwab Bank High Yield Investor Checking account includes a debit card that does not charge foreign transaction fees. Furthermore, it offers unlimited ATM rebates and a generous APY of 0.40%, among other things. There is no monthly fee and no minimum account balance that you need to maintain for this account.
Furthermore, Charles Schwab Bank offers a credit card that does not charge foreign transaction fees. It is called the American Express Platinum Card® for Schwab. It comes with a rather hefty annual fee of $695. However, it includes several benefits, including statement credits on hotel and airline bookings, digital entertainment credit, a Walmart+ monthly membership credit, and much more.
HSBC is a British multinational bank with branches in the U.S. While its U.S. presence is relatively small, it is known worldwide, with offices in 64 countries. According to Forbes, it is the 38th largest company in the world.
The HSBC Premier Checking account has no foreign transaction fees and no fees when withdrawing from any HSBC bank or ATM worldwide. You also get up to five rebates per month when withdrawing from non-HSBC ATMs in the U.S. The account has a rather hefty monthly fee of $50, which the bank will waive when you meet the qualifying criteria.
HSBC also offers a selection of credit cards with no foreign transaction fees. The HSBC Premier Credit Card is one such card that also has no annual fee. It comes with an introductory offer to earn 35,000 additional points.
Other perks offered with this card include cash back offers, TSA precheck credit, complimentary Wi-Fi at select locations, and many others.
7. Varo Bank
Varo Bank is an online bank that is a member FDIC in its own right. It has no branches and offers a limited selection of products and services as an online bank.
Varo’s debit card is tied to their online bank account, which has no monthly fees and minimum balance requirements. There are no foreign transaction fees, monthly or overdraft fees. In the U.S., free ATM withdrawals are limited to AllPoint ATMs – anything else will incur a charge.
Varo offers a secured credit card called Varo Believe. While it works like most other credit cards, its main purpose is to help those with poor credit scores improve their standing. It has no annual fee and no international fees (which is the equivalent of a foreign transaction fee). You need to use your money for the credit card to work, and payments are reported to the three credit bureaus.
Credit Unions without Foreign Transaction Fees
If none of the banks feel the right fit for you, why not try a credit union instead? These financial institutions work similarly to banks, with the biggest exception being that they’re not for profit. As such, they tend to have lower to no fees, including no foreign transaction fees.
Navy Federal Credit Union is one of the biggest credit unions in the U.S. They do not charge foreign transaction fees on all their credit cards, giving you more options to choose from, including cash rewards credit cards. Other credit unions also offer similar cards.
Remember that credit unions are membership-based, so you will need to find one you are eligible to join. Keep an eye out for credit unions in your local area or work sector. Some places of employment also have a credit union.
How to choose a foreign transaction fee-free bank
As we have just shown, all sorts of cards are available that do not charge a foreign transaction fee. While choice is always good, it can also make it difficult to pick the best option for you.
This section will cover some of the essentials you should consider when choosing a bank with no foreign transaction fees.
A debit card or credit card
Many banks offer debit and credit cards with zero foreign transaction fees. Remember that some banks refer to these fees by different names, including international fees. Foreign exchange fees, on the other hand, are something entirely different.
Choosing a debit or credit card will largely depend on your requirements. Think about fees as well as the perks that each card offers.
How often you travel can greatly impact which card is your best option. Some credit cards with no foreign transaction fees have high annual fees, which can be difficult to justify if you rarely travel.
On the other hand, if you’re jet-setting around the globe regularly, a higher-tier credit card can give you some great benefits that you’ll get to use frequently – possibly justifying the high annual fee. Of course, you’ll also find cards with lower or no annual fees. These cards tend to have fewer perks but are more affordable.
While not paying for foreign transaction fees is good, you should also be wary of any other fees the card charges. Ensure you take the time to check the schedule of fees before signing up for the card. Understanding what you’re signing up for will help you avoid situations where you pay out more than you save in other fees.
If you’re not sure which fees are your highest expense, an old bank statement can help you shed some light.
The APR is exclusive to credit cards since debit cards only allow you to use your own money. Some debit cards even offer an APY, which pays you money instead of the other way around.
The bank will usually provide an APR range with the applicable rate depending on several factors. Your credit score will feature highly in which rate you qualify for, with higher-tier cards tending to have higher rates if your score is lower than required.
You can get more out of your credit card by looking for offers such as cash back rewards and miles. Be sure to read the terms and conditions of the credit card you’re considering to ensure you can avail yourself of these perks.
A good online banking solution coupled with a solid banking app is critical when traveling abroad. Most solutions allow you to block and unblock your cards without relying on the bank’s customer support.
You should also be able to initiate transfers and do a host of other things at any time of the day – something that can be very important when you’re in a different timezone.
Other Ways To Avoid Paying Foreign Transaction Fees
You can avoid paying foreign transaction fees in different ways. Choosing a bank with no foreign transaction fees is an option. However, there are plenty of other ways to skip foreign transaction fees altogether. Let’s go through them one by one.
The bank cannot charge you any foreign transaction fees if you don’t withdraw money. While this is the simplest way to avoid paying foreign transaction fees, there may be better ones.
Carrying substantial amounts of cash on your person is a security risk. The risk tends to be greater if you’re going to a country you do not know very well. Many countries also limit the amount of cash you can carry in and out of the country. Anything above the limit may be confiscated. You will, more than likely, also face court proceedings.
Of course, carrying small cash is advisable, especially if you go somewhere where cards are not widely accepted. As always, proceed with caution.
Pay in U.S. Dollars
Some foreign merchants may give you the option to pay in your domicile currency – in this case, U.S. dollars instead of the local currency of the place you’re visiting. If you choose this option, the bank will not charge you a foreign transaction fee since you will pay in U.S. dollars.
While this might seem like a good option, there are caveats. The most important thing you need to be aware of is that, in such cases, the merchant sets the exchange rate. Now, the merchant might be a very honest individual, or they might inflate the exchange rate.
Depending on how much the rate is inflated, you may pay more than the bank would have charged you.
Credit Card / Debit Card
You need to decide ahead of time whether you plan on using a credit card or a debit card. Both can come with no foreign transaction fees, giving you more options. However, they work very differently.
Most credit cards that do not charge foreign transaction fees are of the travel variety. They’re commonly known as travel credit cards or travel rewards credit cards and tend to offer travel rewards and other perks.
Travel rewards can give you more overall benefits when choosing a credit card over a debit card; however, this may come at a cost, including annual fees and APR.
Many banks offer free debit cards with their checking accounts, some of which do not charge foreign transaction fees. While the card is free, the account might still have a monthly service fee. Something to keep in mind when comparing different banks.
Debit cards can be topped up through direct deposit, helping you ensure there is always money flowing in. For added security, some banks will also allow you to link your savings account, thus avoiding NSF (insufficient funds) or overdraft fees.
Free vs. Reimbursed Foreign Transaction Fees
One thing worth remembering is whether fees are not charged in the first place or given as a rebate. While there is no difference at the end of the day, if fees are given as a reimbursement, this might put a financial strain on you if you’re on a tight budget.
Avoid Foreign Transaction Fees When You Travel
Traveling can be a lot of fun and less stressful with some planning. Card transactions and cash withdrawals in a foreign country can cost you a lot of money due to international atm fees and foreign transaction fees, among others. However, with some planning, many such fees can be avoided or minimized, leaving you with more cash in your pocket.
Banks with no foreign transaction fees are one of the best solutions, as they allow you to use your card freely without worrying about costs. They also offer cardholders additional perks, such as Visa’s zero liability program, giving you extra peace of mind.
The important thing is to be aware of any additional fees the ATM operator or your credit card issuer may levy. Understanding these fees can help you avoid them (wherever possible) and ensures you get the best bang for your buck wherever you go.