What is an international or foreign transaction fee? | OFX (2024)

An international transition fee (also known as a foreign transaction fee) is charged to you, the consumer, by your bank credit card company whenever you buy something in a foreign currency.

And while most of these charges are applied when you’re travelling or in another country, they can also be added to your bill when you make a purchase online in a different currency.

According to the Bank of America, the average international transaction fee is typically around 3%¹. This fee also depends on the terms and conditions of your credit or debit card.

1% of that fee may go to the payment processor, whether it’s Visa or MasterCard, and the other 2% might go to the bank that issued your credit or debit card.

3% may not sound much, but these fees can quickly add up if you’re making a lot of small purchases regularly, or if you’re making a large purchase.

For example, if you spend $100 on your card and your international transaction fee is 3%, you’ll be paying an extra $3. But if you spend $1,000, you’ll be paying an extra $30.

On top of that, some credit cards also charge a 3 – 5% margin on the market rate for the day.

What is the Market Rate?

The Market Rate, also known as the “interbank rate” or the “mid-market rate,” is essentially the ‘wholesale rate’.

Wholesale rate is typically available only to large financial institutions or those who purchase large volumes of currency.

Looking to send money internationally? Compare currencies and get real-time market rates.

This rate is at the credit card company’s sole discretion, and you may not know how big is the margin you’ll be charged in advance. International transaction fees can make your shopping more expensive, but there are ways to avoid them.

1. Check your credit cards’ terms and conditions

You might have a card that doesn’t charge these fees. Consider using this card whenever you’re planning on purchasing products from abroad, as well as when you travel overseas.

2. Look for cards that don’t charge an international transaction fees

If you regularly travel overseas or often shop online in a foreign currency, you may want to consider applying for a credit card that doesn’t charge any international fees.

When applying for a new card, remember to check the annual fee as well. This is a lump sum fee you have to pay every year that you’re signed up for certain credit cards.

3. Use a money transfer service

Ask your vendor if they accept payment directly to their bank account. If they do, you can use a money transfer service like OFX.

OFX may have lower or no transaction fees and a better exchange rate. However, in some regions, a third party intermediary or bank may deduct a fee from the value of the transfer. This fee may vary and OFX receives no portion of it.

Plus, you can make transfers in 50+ different currencies to over 170 countries (and counting), 24/7 on your own schedule, not your bank’s.

When you’re comparing exchange rates offered, remember to consider both the exchange rate that is quoted and any transaction fees.

Enjoy extra savings on your first transfer

New to OFX? Take advantage of a great introductory rate across 7 currencies (AUD, USD, SGD, GBP, NZD, EUR, CAD) on your first personal transfer. Terms and conditions apply.

Related Questions

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1. https://bettermoneyhabits.bankofamerica.com/en/saving-budgeting/how-to-pay-when-traveling-abroad