fbpx

What Are eCommerce Foreign Transaction Fees And How To Avoid It

What are eCommerce forign transication fess

Foreign transaction fees are a fact of life for anyone who has used their credit card outside of the United States.

This is what’s known as hidden fees, which are often buried in the fine print of your credit card contract.

You might be asking: What exactly are these transaction fees, and do they vary from card to card?

We’ve explained the nitty gritty details in this article ,in addition, We’ll help you avoid it.

What is a foreign transaction fees And How It calculated?

A foreign transaction fee is a charge on your credit card bill for making purchases that pass through a foreign bank or are conducted in a currency other than the US dollar.

Many credit card providers charge this fee (which can range from 1% to 3% of the purchase).

The foreign transaction fee is made up of 2 components:

1) Currency Conversion Fee

The whole transaction is rounded up to the nearest cent, and this portion of the FX fee is charged by the credit card network (Visa or Mastercard). The both charge a fee of 1%.

You may also like:

2) Issuing bank fee

Some credit card companies tack on a premium to the network charge, which is usually around 2%.

Alan Chen

Free 30-Min Strategy Session

By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.

Some don’t add their own and go as far as absorbing the cost, so you won’t have to pay anything.

Note: Foreign transaction fees are sometimes charged as a single charge to your credit card statement per purchase, despite the fact that there are two parts to the fee. These charges are determined by the bank.

How are foreign transaction fees calculated?

If you’re going on vacation to Italy and pay €82 with a MasterCard network card, you’ll be charged a 2% issuing bank fee.

Using the exchange rate, this equals $100 in USD.

Mastercard will charge 1% on top of the cost of your room, based on that amount. The lender will charge another 2%.

As a result, your hotel’s real cost is ($100 * (1% + 2%)) + $100 = $103.

This doesn’t sound too much, but you may end up paying an extra 1% to 3% in fees on each purchase — which can soon mount up if you make numerous purchases or spend time away frequently.

Remember that foreign exchange rates affect most international transactions. You won’t be charged $20 for breakfast if you’re charged €20 for it.

The amount in euros will be converted to dollars using the current exchange rate.

All foreign currency transactions are converted to USD using MasterCard and Visa’s designated rates.

After currency conversion has been completed, foreign transaction costs are incurred.

Some sellers will ask whether you want to be charged in USD upfront, via dynamic currency conversion — we discourage this.

Knowing the total cost in USD may appear to be a good idea, but dynamic currency conversion is frequently coupled with a worse exchange rate.

You may also like:

PayPal & Stripe Foreign Transaction Fees

Stripe allows you to process payments in over 135 different currencies, allowing you to charge clients in their own currency while receiving funds in yours.

If your online business has a global presence, accepting payments in their home currency might encourage consumers to make additional purchases.

The cost of stripe foreign transaction may vary depending on the payment method used. There is a 1% currency conversion fee for international payment methods, in addition to a 1.5 percent service fee.

When using PayPal for international, there is a 5.00% fee regardless of the amount you send or receive. When paying with PayPal balance, bank account, or cards.

The maximum international fee for PayPal is $4.99, while the minimum international fee is $0.99.

How To Avoid Foreign Transaction Fees

The most common way to avoid foreign transaction fees is to utilize a card that doesn’t charge one.

That said, there are 5 things you may do to prevent these expenses:

1) Open a Credit Card That Doesn’t Have a Foreign Transaction Fee

There are several credit cards that do not charge foreign transaction fees. None of the capital one consumer cards charge this fee, and many popular travel credit cards do not either.

Some credit cards also provide additional perks that can be useful while traveling.

You may also get a statement credit to reimburse you for the cost of Global entry, allowing you to breeze through airport security lines quickly. However, unless you’re a frequent flier, the card’s $550 annual fee might be tough to justify.

You may also like:

Which credit cards have no foreign transaction fees?

There are numerous credit cards that waive foreign transaction fees as a perk, and the majority of these are travel credit cards.

Many co-branded hotel and airline cards do not charge foreign transaction fees, while premium travel rewards like travel rewards cards with high annual fees usually do not.

Let’s look at 3 of the best credit cards that don’t charge foreign transaction fees:

CardEarning rateAnnual fee
Capital One Venture Rewards Credit Card2 Miles per dollar on every purchase, every day$95
Chase Sapphire Preferred® Card5x on travel purchased through Chase Ultimate Rewards®, 3x on dining and 2x on all other travel purchases$95
Capital One VentureOne Rewards Credit Card1.25 Miles per dollar on every purchase, every day$0

You may also like:

2) Create a Bank Account That Does Not Charge Foreign Fees

Not paying foreign transaction fees with a credit card can help you save money.

Some merchants, on the other hand, may charge you additional if you use a credit card, or they may not take them at all.

If you’re planning to leave the United States, be sure your bank charges any additional costs when you’re outside the country.

Fees may be levied on your debit card if you make a foreign charge. You could avoid these by following the instructions correctly if you do it right in the first time.

The Charles Schwab Bank High Yield Investor Checking account is a popular choice since it has no account minimums or foreign transaction costs. All worldwide ATM expenses are reimbursed by Charles Schwab.

If you don’t want to create a new bank account for traveling, see if your bank has branches or partner banks in other countries.

You may be able to withdraw money from ATMs at those locations for free.

You may also like:

3) Keep an eye on conversion and transaction costs

Fees for international transactions can take many various forms, and they can differ depending on the currency you’re paying in and where you’re buying.

There are also costs associated with currency conversion, which may be charged by payment networks, banks, ATM operators, and retailers.

These are price markups on the conversion rate that are frequently unavoidable.

But don’t panic, There are ways to minimize them.

Foreign transaction fees may be charged by a number of credit and debit cards.

The cost is incurred whenever you make a payment in another currency, or when a foreign bank handles your transaction.

You may be charged a foreign transaction fee if you make a purchase online while in the United States or abroad, even if you’re paying with US dollars.

If you buy anything using a currency other than the US dollar online in the United States, you might be fined.

However, if you use a card that does not have the fee (like the cards we mentioned above), you can avoid these costs easily.

You may also like:

4) Exchange your money for the local currency Before You Leave

To avoid expenses, go to your bank in the United States before you leave and exchange your money for the local currency in your destination.

You may find that your bank or credit union charges a low (or no) foreign exchange fee, making it an excellent place to change money.

Exchanging your money at an airport or other port of entry when you travel may be inconvenient.

However, having some money set aside when you arrive might be beneficial, and you’ll probably save a lot of money compared to changing currency at a terminal or other border crossing.

5) Don’t Pay With The US Dollar

They might inquire if you want to pay in the local currency or US dollars when you pay with a card.

It may appear to be the polar opposite, but paying in a foreign currency is frequently the superior choice.

You can find out how much it will cost to purchase an item in another currency online by viewing Google’s currency converter.

You may also compare the conversion costs for various payment networks to help you decide whether to use their service or go through with your planned transaction using the Money Transfer Service calculator.

You may also like:

Credit card issuer foreign transaction fees

Exchange fees differ from one card provider to the next.

This rate might also vary depending on the credit card from the same bank.

The table below summarizes both typical foreign transaction fees as well as cards from that bank with no FX costs, in the event you’re searching for a different option.

In addition to offering non-FX-charging options, each major lender has at least one:

The ProviderForeign transaction fees
Bank of America3%
Barclays3%
Capital One0%
American Express2.70%
Chase3%
US BankUp to 3%

How to Recognize Foreign Transaction Fees on Your Credit Card

Unless a product lacks these costs, Credit card issuers usually don’t advertise the fact that their cards charge foreign transaction fees.

If you can’t find “no foreign transaction fees” advertised as a benefit for a card product, it’s safe to assume the card will charge an FX fee.

Your foreign transaction fees will look like this:

How to Recognize Foreign Transaction Fees on Your Credit Card

You may also like:

When are foreign transaction fees incurred?

If a transaction passes through a foreign bank, the credit card companies will consider it “foreign.”

You don’t have to be living outside of the United States at the time of purchase (For example, if you have an international eCommerce store).

Foreign transaction fees may apply to certain transactions, such as those completed in a different currency with an international vendor.

Even if your transaction is completed in USD and travels through the United States.

You could be charged a foreign transaction fee if:

  • A transaction takes place with a vendor located outside of the United States.
  • A transaction involving a foreign currency has occurred.
  • A transaction is transferred through a foreign bank.

Note: A foreign transaction fee is a fee charged by your credit card company when you purchase something in another country, even if the transaction appears to be made in U.S. dollars. Some countries (such as Panama and Ecuador), use the dollar as their money.

You may also like:

What Should You do if you are Overwhelmed? (Which is not your fault)

As your company grows larger, the issues you face with foreign transaction fees become increasingly complicated.

When you reach this stage, you must hand over control to the specialists so they can assist you in growing your online business while keeping your focus in your business growth only.

We here at Free cash flow, helping online businesses (like your business) to boost their revenue and doing what other firms miss.

I know you’re anxious about not receiving as much as you had hoped, but believe me when I tell you that we exceed your expectations.

Move your online business to the next step NOW and book a free consultation call with Alan Chen, CEO of Free cash flow

FAQ

What is a Foreign Transaction Fees ?

A foreign transaction fee is a charge on your credit card bill for making purchases that pass through a foreign bank or are conducted in a currency other than the US dollar.

Many credit card providers charge this fee (which can range from 1% to 3% of the purchase).

How do I avoid foreign transaction fees?

1) Open a Credit Card That Doesn’t Have a Foreign Transaction Fee.

2) Create a Bank Account That Does Not Charge Foreign Fees.

3) Keep an eye on conversion and transaction costs.

4) Exchange your money for the local currency Before You Leave.

5) Don’t Pay With The US Dollar.

What are the reasons for foreign transaction fees at banks?

When you make a purchase that goes through an overseas bank to process the transaction, certain cards charge foreign transaction fees.

Banks may have to convert the purchase into US dollars when you make a transaction while traveling or on a non-U.S. website.

Is there a transaction fee for international online purchases?

Yes, foreign transaction fees are incurred whenever a merchant’s headquarters is outside of the United States. This applies to debit cards and credit cards as well.

Is there a foreign transaction fee refund?

It depending on the issuer, Because the card issuer needed to make currency market purchases to process your card purchase and incur a cost to service your needs, you should anticipate that foreign transaction fees will not be reimbursed.

Does stripe/PayPal charge Foreign international fees?

Stripe and PayPal both charge a 2.9 percent + $0.30 fee on every online transaction for international sales, as Stripe charges 1%, plus an extra variable fee dependent on the currency received, whereas PayPal charges 4.4 percent per transaction with another set fixed cost that varies by currency.

Share on twitter
Share on linkedin
Share on email

Free E-book for E-Commerce Entrepreneurs

9 Most Crucial eCOM Tax Deducations The IRS Doesn’t Want You to Know
Share on facebook
Share on twitter
Share on linkedin

Explore More

Blog

Accounting for Cryptocurrency: A Complete Guide

Cryptocurrency is nowadays becoming a robust financial backbone for businesses. This digital, decentralized financial alternative to traditional centralized finance leverages the potential of financial technology

Boost Your E-Commerce Business Now

drop us a line and keep in touch
Alan Chen

Schedule Your Call with Alan!

Hate working with accountants that don’t understand your online business?

By the end of this Strategy Session, you will have a clear understanding of the next steps you can take.

 This Call Is Completely FREE.

Take Less Than 60 Seconds To Share What You Love

Share on facebook
Facebook
Share on twitter
Twitter
Share on reddit
Reddit
Share on linkedin
LinkedIn