what is a foreign transaction fee

A foreign transaction fee is a charge assessed by a financial institution to a consumer who uses an electronic payment card to make a purchase in a foreign currency. This fee is imposed by a credit card issuer on a transaction that takes place overseas or with a foreign merchant. The fee is typically 1%–3% of the value of the transaction and is paid by U.S. travelers in dollars. Online purchases that take place with overseas vendors may also be subject to such a fee. Foreign transaction fees are not always the same as currency conversion fees and may be tacked on to foreign transaction charges. The fees are often a combination of two charges, one from the card issuer and the other from the network. Foreign transaction fees generally range from 1% to 3% and tend to average around 3% of each transaction. Although both foreign transaction fees and currency conversion fees can occur on purchases made abroad, they are significantly different. Foreign transaction fees can be avoided with the right credit card, and several banks or credit card issuers now offer certain customers waivers on these fees or fee-free cards.