We all get tons of credit card offers in the mail, but the differences between the credit cards and what their benefits are not always clear. It often appears that they’re just all the same; make purchases on card, pay back monthly. However, this is not so, and knowing how one card differs from another can save you money and avoid unnecessary fees.
One area that is often overlooked is foreign transaction fees. If you don’t know what it means, you might be tempted to ignore the term, and that’s what many people do; but it’s a mistake. Foreign transaction fees are hidden fees charged by your credit card issuer when you make an international purchase. The fee is generally 3% of the purchase price each time you swipe your card outside of the U.S., which is made up of 1% from the transaction network, such as Visa or MasterCard, and around 2% from the issuing bank. You won’t see the extra charge when you make your purchase; you’ll only notice it when you get your credit card statement at the end of the month.
This fee, also known as a currency conversion fee, is tacked onto your purchase supposedly for the simple act of converting the currency you’ve paid in to dollars. For example, if you buy a souvenir pin in France, the Euros you paid in will show up as a dollar amount on your credit card statement according to the current exchange rate, plus a foreign transaction fee. This fee is in addition to the generally sorry exchange rate the credit card company uses.
Not only do you need to be wary when on foreign soil, but also when shopping online from a foreign web site. Don’t imagine that foreign transaction fees won’t affect you because you don’t travel, and always be on guard for hidden fees from your credit card company.
If you are traveling, there are several ways you can avoid foreign transaction fees. One is to use cash. However, that’s not necessarily recommended because of the high prospect of pilfering that often goes on at hotels. You don’t want to be walking around with all of the money you plan to use on your trip. The smarter route is to apply for a credit card that has no foreign transaction fees, which are becoming more widely available. These also free up your online purchases from any potential hidden foreign transaction fees.
While these fees generally won’t break the bank, they could add up pretty quickly if you travel frequently. Investing the time to get a fee-free card can only help you in the long run.
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