Ask an Expert: Will I Get Hit With Foreign Transaction Fees?

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A Money Talks News reader recently wrote me with this question:

I was just looking at your story on credit card fees charged by banks for having to convert currencies. My family and I are going to Costa Rica this year. I currently use my primary credit card for trips. It is an American Express Gold card. Will they charge me fees for my purchases made in Costa Rica? If so, what is my best option for getting around them?

Thanks for your help,

Dennis

My response

It sounds like you are going to have a lot of fun on a family trip to Costa Rica. I haven’t been there, but it is definitely on my list. But be careful with these foreign transaction fees. American Express will charge you an extra 2.7 percent on top of everything you buy there.

Another thing: These fees are not foreign conversion fees, they are foreign transaction fees. What’s the difference? Foreign transaction fees apply to all charges processed outside the United States, even if conducted in U.S. dollars. For example, Panama, Ecuador, and El Salvador all accept American currency as legal tender. Yet any card that charges a foreign transaction fee will charge it any time your card is accepted outside of the United States. And if you use your credit card for hotels, car rental, and meals for a family vacation, these charges can become pretty high. Even worse, if you make a purchase at home that is merely processed outside the United States, you may also be charged this fee.

So how can you avoid this? The first step is to look at the cards you have and figure out which ones charge a foreign transaction fee. Thankfully, a growing number of cards no longer have that fee, especially those marketed toward travelers. For example, some of my favorite fee-free cards include the Ink Bold and Sapphire Preferred cards from Chase, and any card from Capital One.

But if you don’t have a fee-free card already and you can’t get one in time for your trip, the very least you can do is to call your credit card issuer when you return and ask to have the fees refunded. These fees are a sensitive subject, and your bank may be willing to waive them to retain a good customer.

Have fun!

Note: While we attempt to be completely objective when reporting on credit cards, this site may be compensated by issuers when a reader applies for a credit card through the links within credit card stories or on our credit card search page.

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