Frequent international travelers will tell you that one of the best ways to avoid expensive charges for exchanging currency or travelers checks is to use your bank card at local ATMs to withdraw money in local currency and to use your credit card for purchases. However, many of the major banks tack on foreign currency conversion fees to these transactions, which can run as high as 2 to 3%.

What Is a Foreign Currency Conversion Fee?

Currency conversion fees, also known as foreign transaction fees, occur when you use either a credit card or debit card to make a purchase (or withdraw cash from an ATM).

In a nutshell, these are charges for converting local currency over to U.S. dollars whenever you shop abroad. Visa and MasterCard both charge a standard 1% currency conversion fee for foreign transactions. For example, when you’re on vacation in Mexico and your merchant charges you in pesos, your bank converts those pesos to U.S. dollars and passes on the exchange fee to you.

How Can I Tell What Fees Are Being Charged?

It’s almost impossible to tell at the time of the transaction, and, honestly, it’s not much easier once you receive your billing statement. That’s because many issuers roll those charges into their base foreign transaction fee. Even though others list it separately, it’s not all that much simpler. If you’re curious about the charges your card issuer might place on foreign transactions, the disclosure of these fees is usually buried deep in the fine print of the terms and conditions the companies send when you open your account, and they rely on the fact that very few people consider these charges when electing a credit card or bank. A call to your bank or credit card company prior to travel for an explanation of how these fees are levied can end up saving you significant money, particularly if you plan to do a lot of shopping.

How to Avoid Currency Conversion Fees

A lot of issuers charge at least 1% for foreign currency conversion, as this is the standard fee that MasterCard and Visa charge issuers. But some credit card issuers and banks will tack on an additional fee of up to 3%. If you’re using your debit card for cash withdrawals, you may find additional ATM fees added when you withdraw cash from machines in foreign countries.

Here’s a list of the standard foreign transaction fees charged by major issuers:

• American Express: 2.7%
• Bank of America: 3% 
• Capital One: 0%
• Chase: 3%
• Citibank: 3%
• Discover: 0%
• Wells Fargo: 3%

Most of the issuer’s listed above do offer select cards that don’t charge a foreign conversion fee. Before heading off on your next trip overseas, be sure to call your bank or credit card company to see what fees will be applied to your foreign purchases and cash withdrawals. These fees can add hundreds of dollars to the final cost of your trip — money much better spent on fun or gifts.

If you’re a frequent traveler, or plan to be in the near future, and your credit card or bank has foreign currency fees higher than 1%, you may also want to consider getting a credit card that has no foreign transaction fees. Before you apply for a credit card, it’s a good idea to check where your finances stand. You can view two of your credit scores for free on Credit.com.

This article has been updated. It was originally published Oct. 3, 2013.