How to Avoid Foreign Exchange Fees When Travelling

Looking for ways to save money when travelling? Here are some tips to avoid one of the most overlooked expenses: foreign exchange fees.

Travel can be expensive. When you start booking flights and hotels, the costs can add up – let alone the actual spending on dining, experiences and souvenir purchases while on vacation.

So, it only makes sense for travellers to want to dig into where any savings might be possible.

When travelling internationally, one of the most overlooked expenses is the foreign transaction fee (FX fee), which is a small percentage added to every purchase you make in a foreign currency when using a credit card. This fee isn’t a separate line item transaction, but instead is folded into and seemingly hidden within the transaction that you made in a foreign currency.

Most credit cards charge around 2.5% per transaction, which doesn’t sound like much at first, but the cost adds up quickly once you factor in hotels, meals, transportation and activities.

In simple math terms, it means you will pay an extra $2.50 per $100 spent.

There is good news, though, as there’s a way around this annoying fee that doesn’t require much effort at all.

A powerful tool hidden in plain sight: Credit cards with no foreign exchange fees

Whether you’re already in the know or you’re brand new to how credit cards can improve your travels, there are many credit cards that offer no foreign transaction fees as a benefit of holding the card.

Many of these cards also have no annual fee, so you don’t even need to pay for a premium credit card to benefit. If you want to see a few examples, check out this list of the best credit cards for Canadians that charge no foreign transaction fees.

If you’re a frequent traveller or someone who spends a lot of money abroad, whether via extended vacations or remote work trips, the savings that can be had from this benefit are even more meaningful. Over time, the amount you keep in your pocket rather than paying in FX fees can offset a card’s annual fee entirely.

Plus, having a credit card with no FX fees can also save you money when you make general purchases online in a foreign currency, adding even greater value.

Saving on travel with a credit card with no foreign transaction fees

Sometimes, looking at the math from a big-picture perspective can make the impact that a credit card with no foreign transaction fees can have much more understandable.

So, let’s do the maths on a typical week-long trip. Let’s say you spend $3,000 abroad in that week. At 2.5%, that’s an extra $75 in fees for absolutely no additional value.

Ridiculous!

Now compare that to using a credit card with no foreign transaction fees. On the same $3,000 trip, you save the full $75. Stretch that over multiple vacations each year, plus occasional foreign currency online purchases (like hotel bookings or international retailers), and the annual savings can easily reach $150 to $300 without any effort.

The maths becomes especially compelling when you pair no-FX cards with other travel rewards. You’re not only avoiding the 2.5% penalty, but potentially earning points on top of it.

For example, a card that earns the equivalent of 2% back in travel rewards effectively delivers 4.5% better value on foreign purchases compared to a regular credit card that both charges FX fees and earns the same base rate.

Avoiding the foreign transaction fee is one of the most straightforward, guaranteed and easy ways to reduce the cost of travel and maximise the value of every dollar you spend abroad.

Be aware: Credit card acceptance when travelling can be spotty

While credit card acceptance worldwide has increased and is pretty good, it’s important to recognise that you may encounter a merchant that doesn’t accept credit cards, rendering your credit card with no foreign transaction fees useless. With this in mind, you should also keep some local currency on hand or have other payment methods available, just in case you are unable to use your credit card.

It’s also important to note that not all credit card networks are accepted equally worldwide. While Visa and Mastercard are nearly universal worldwide, American Express (or Amex) acceptance can vary significantly depending on the country, region or even the individual merchant.

Many small businesses, independent restaurants and local shops may choose not to accept Amex due to its higher processing fees. While these fees have lowered over the year, the perception of Amex is still that of an issuer that charges higher fees to merchants who accept customers who swipe these cards.

This is particularly common in parts of Europe, Southeast Asia and smaller towns where card margins are tighter. Even in major cities, travellers can occasionally run into situations where only Visa or Mastercard will be accepted, which can quickly become inconvenient if Amex is their primary travel card.

Because of this, it’s always smart to bring at least one backup credit card when you travel to ensure you’re covered in any situation. While American Express cards are the choice of many travellers as they offer strong rewards, excellent benefits and top-tier customer service, relying on them exclusively can leave you stuck at the checkout counter or unable to book services on the ground.

Carrying a mix of cards gives you both the perks of Amex and the broader acceptance of other networks, ensuring your travel plans stay smooth regardless of where you are in the world.

Final thoughts

If you haven’t already, consider adding a credit card to your wallet that offers no foreign transaction fees as a benefit in advance of your next trip (and keep in mind, you can also earn cash back on your next credit card application).

While this benefit won’t save you thousands of dollars immediately, it can add up over time and offers enough value that you should always make sure you bring a card with this benefit on every future vacation.

Do you use credit cards with no foreign exchange fees? What are your favourite cards?

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Before you go… here are some more handy travel tips:

• How to Plan a Trip: 15 Easy Steps to the Perfect Travel Itinerary
• 11 Ways to Travel More With a Full Time Job
• Expat Finances: How to Manage Your Money When You Move Abroad