Whether you pay cash or use your credit or debit card/s to pay for a meal or withdraw cash while overseas, you will be exposed to a number of charges. Here is a list of typical fees, who charges them and when they are being charged. While it might seem tedious, understanding these charges helps you avoid or at least minimise them where possible. Unless otherwise stated, these fees apply to both credit and debit cards.
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| Reference | Charge | Who charges them? | How much is typically charged? | When is it charged? |
|---|---|---|---|---|
| A | FX Spread | FX Provider | 1) VISA/MasterCard charge the lowest spread above wholesale rates (usually 1-2% above wholesale FX rates pending currency) 2) 10% and more are not uncommon for FX Bureaus exchanging cash | Whenever you exchange currencies (whether in cash or using a credit / debit card). This includes paying for online purchases in a currency other than your card issuer’s currency. |
| B | FX Commissions | FX Provider | Up to USD10 per transaction is not uncommon | When you exchange cash at FX Bureaus (for example, at airports, along streets frequented by tourists or at bank branches). |
| C | Foreign transaction fees | Card Issuer | Up to 3% of transaction value | On overseas purchases (of products and services, including online orders of items shipped from other countries to your home country) and usually shown as separate amount on your card/ account statement. |
| D | (Dynamic) Currency conversion fees | Overseas Merchant | Totally up to the merchant: Spread is worse than Visa/MasterCard FX rates (which are already a few % points above wholesale FX rates - see A1 above) | On transactions processed in a currency other than your card issuer’s currency. You are exposed to it when a merchant asks you whether you want to pay in the purchase currency or your card issuer’s currency (and you select the latter, which means you allow the merchant to set their own FX rate). |
| E | Withdrawal / ATM service fees | Overseas Bank | Up to 3% of transaction value or USD5 per transaction are not uncommon | On cash withdrawals at an overseas ATM or bank branch. Charged as % of the transaction or a fixed $ amount and displayed by the ATM (or advised by the teller) before you finalise your withdrawal. |
| F | Cash advance fees | Card Issuer | Up to 3% of transaction value or USD5 per transaction (whichever is greater) are not uncommon | Whenever you use a credit card to withdraw cash. |
| G | Interest on Cash Advances | Card Issuer | 20%+ of transaction value is not uncommon | Whenever you use a credit card to withdraw cash using your credit limit. Interest starts accumulating as soon as you withdraw cash. |
What bank fees did you incur when you last travelled overseas?
I wrote this travel finance article based on my own personal experience. If you, like most people, incurred overseas transaction fees on your foreign purchases and have something to add, please feel free to contact me. If you liked the tips and found them helpful, I would appreciate if you could share them with your friends and family via the Share buttons below. Even better, link to the page from your personal blog or social media platforms.