What Do Americans Know About Foreign Transaction Fees?
Headed overseas? One thing you may want to consider is whether your preferred credit card charges you a foreign transaction fees. If you aren’t sure whether it does or not, you’re certainly not alone. According to a new study by WalletHub, Americans have several misconceptions about foreign transaction fees and may be overpaying for purchases while abroad.
First, credit cards have increasingly become the preferred payment method for many international travelers. In fact, while half of those who have traveled abroad in the past five years say they used credit cards for the majority of purchases, only 19% those heading overseas more than five years ago said the same. As result foreign transaction fees are becoming a more important factor in the personal finances of many.
In their study, WalletHub discovered that more than half of all people don’t know whether or not their credit card charges them foreign transaction fees. However, despite the majority of respondents not knowing if their card charged fees, more than two-thirds said they’d never get a credit card that assessed foreign transaction fees. Meanwhile 51% said they’d rather pay foreign transaction fees than annual fees for a card. For the record, 72% of credit cards charged foreign transaction fees, with the average fee sitting at 2.14%.
What was also surprising about that study was that a whopping 86% were unaware that foreign transaction fees can not only apply to purchases they make while physically traveling overseas but can also be charged when making online purchases from foreign vendors. WalletHub also notes that 59% of people surveyed answered incorrectly when asked whether they should select to pay in U.S. dollars or the local currency when traveling. While selecting USD might help consumers avoid foreign transaction fees, the conversion rates on such options can be up to 9% higher than normal. Similarly only a quarter of those surveyed realized that credit cards are the best way to get favorable conversion rates while abroad.
Overall, although foreign transaction fees might not seem like a big deal to many Americans, they can really add up when traveling. Furthermore it’s worth considering that most credit card rewards offer users 1% to 2%, while transaction fees range from 2% to 3% — meaning travelers are losing money with each purchase. Ultimately, if you have some international travel plans coming up, it may be worth looking into a credit card that doesn’t assess foreign transaction fees (Note: our own Kyle Burbank recommends the Uber Visa card, which doesn’t charge an annual fee.)