A markup fee in credit cards refers to an additional charge imposed by credit card providers for foreign currency transactions, such as purchases made in a different currency than the cardholder's local currency
. These fees are typically charged at between 2% - 3% of the transaction amount
. Markup fees are usually split into multiple parts, with a portion going to the processor (e.g., Mastercard or Visa) and another portion going to the issuing bank (e.g., Bank of America)
. Some key points about markup fees include:
- They are charged for foreign currency transactions, which can quickly mount up when making large purchases
- Markup fees are negotiable and can vary depending on the credit card provider and the pricing model used
- Wholesale costs, which are non-negotiable fees charged by all credit card merchants, typically consist of 75% to 80% of credit card charges
- Markup costs, which are negotiable fees charged by merchants, typically account for 20% to 25% of the total credit card fees
For example, credit card issuers in India usually charge a foreign transaction fee of 3% to 3.5% on Indian credit cards
. It is essential to be aware of these fees when using credit cards for international transactions, as they can add up and impact the overall cost of your purchases. Some banks and credit card providers may offer no foreign transaction fee credit cards, which could help reduce these fees
