I don't want to be a big bank hater, but I find some of the charges - hidden in fine print details - leave me feeling cheated over and over again. The foreign transaction fee charged on my credit card is one of those fees.
Did you know you're charged a foreign transaction fee on each transaction made on your credit card when you travel abroad?
Have you ever used your credit card when you travel abroad - and found the final amount converter on a purchase a little higher than you expected?
This is because most credit cards have a foreign transaction fee tacked on to the actual interest conversion, but its blended into the final conversion so you wouldn't necessarily notice.
Here's are a few examples of this sneaky foreign transaction fee in action. In the screenshot below, there are three transactions completed in the U.S. In the first one, you can see that the initial charge was $184.90 USD and it was converted to Canadian funds at an exchange of 1.3699 for a total of $253.31 CAN.
The interesting thing about this is that the actual exchange rate on this date was only 1.332 - see below for exchange rates on March 21, 2017.
The conversion came through at $253.31, but based on the true exchange rate posted that day should've been $246.29 - a difference of $7.02.
This is because my card has a foreign transaction fee of 2.5%. Essentially, they tack on 2.5% to the exchange rate for that day.
You'd think transparent banking would include posting the posted rate, then the exchange rate, and the final conversion.
Most people don't know this fee is being charged every time they spend abroad.
If you travel frequently, it can be worth finding a card that has a lower or zero foreign transaction fee. Here are two cards that have no charge for foreign transactions.
Keep in mind that if your alternative for spending abroad is converting and spending cash - you'll be in the same spot - as you will always pay a buy and a sell percentage too.
Credit cards are an amazing and important tool. However, if you pay an annual fee for your card, pay regular interest, AND then pay foreign transaction fees, you credit card is costing you dearly.