Foreign transaction fees are charges imposed by credit card issuers for transactions processed outside of your home country or in a foreign currency. These fees typically range from 1% to 3% of the transaction amount and can increase the cost of international purchases. While these fees may seem minor at first glance, they can add up quickly, especially for frequent travelers or individuals who frequently make purchases from foreign merchants online.
What is Considered Foreign Transaction Spending?
Foreign transaction spending encompasses a wide range of transactions conducted outside your home country's borders or in a currency other than your own. This includes purchases made while traveling abroad, online transactions with foreign merchants, and even transactions with international companies conducted within your home country but processed in a foreign currency. It's important to note that even seemingly domestic transactions, such as booking a hotel room through an international booking platform, can incur foreign transaction fees if the payment is processed in a foreign currency.
Why Foreign Transactions Matter
Firstly, these fees can catch cardholders off guard, leading to unexpected charges on their credit card statements. Additionally, these fees can make international travel and online shopping with overseas merchants more expensive, reducing the overall value of using credit cards for such transactions. Moreover, failing to consider foreign transaction fees can result in overspending and budgeting inaccuracies, potentially leading to financial strain for consumers.
How Crunchly Calculates Foreign Transaction Fees
Credit Card Search Settings
Note: We recommend to input or adjust your expected foreign spending in the boxes here. Your recommended cards will be updated automatically when you input your preferences.
Crunchly employs a straightforward and simplified method to calculate foreign transaction fees, ensuring transparency and accuracy for users. Here's how it works:
- Total Spending Assessment: We start with your total spending across all transactions, including both domestic and foreign transactions.
- Allocation of Foreign Spending: We take your foreign transaction spending share (input in the box above), and multiply it by your total spending.
- Determination of Foreign Transaction Fee: We obtain the foreign transaction fee directly from the card issuer's stated terms and fees for the card.
- Calculation of Foreign Transaction Fee Cost: We multiply your expected foreign spending by the foreign transaction fee percentage to determine the total cost of foreign transaction fees incurred.
Incorporating Foreign Transaction Fee Cost Into Card Recommendations
We factor foreign transaction fees into our card recommendations through the concept of total value.
The total value represents the overall value of a credit card condensed into a single number, encompassing rewards, benefits, fees, and more. By considering foreign transaction fees alongside other pertinent factors, such as rewards and benefits, we aim to identify cards that offer the best value proposition based on their individual preferences and spending habits.
See additional resources to learn more about how we calculate credit card total value and how we determine overall card scores and rankings.
