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From the Experts at Credit.com

Foreign Currency Conversion Fees are an Unwelcome Companion

October 3, 2013 by Shane Romig

Foreign Currency Conversion Fees

As frequent international travelers will tell you, often the best way to avoid expensive charges involved with 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 and credit card providers have begun to take advantage of such overseas purchases by tacking on foreign currency conversion fees which can run as high as 4%.

These fees are often hidden in a total dollar charge on your bank/credit card statement, which makes it next to impossible to know how much the actual fee was that the bank/credit card company charged to your account. The disclosure of these fees is usually buried deep in the fine print of the terms and conditions the companies send you when you open your account, and they rely on the fact that very few people consider these charges when selecting a credit card or bank.

On a recent trip to Buenos Aires, I used both my Wells Fargo and HSBC USA checking account debit cards to make purchases in local currency. When my Wells Fargo checking account statement arrived, I was surprised to find a 3% foreign currency conversion fee tacked on to the purchases I made. The fee was separate from the purchase and clearly marked on my bank statement, which was nice, but I wondered why such a heavy fee was added. I took a look at the terms and conditions of my debit card and was surprised to find that "Wells Fargo will assess a $5 fee for ATM cash withdrawals made outside of the United States and a 3% foreign currency conversion fee for purchases made with your Check Card." The same 3% fee is charged for credit card purchases.

I then went to my HSBC USA bank statement to compare the fee charged to purchases made with that debit card. This time I was surprised to find that there was no conversion fee indicated - simply the amount charged in dollars. Did this mean that there was no charge for foreign currency conversion? I asked HSBC USA, and was told that foreign currency charges were subject to a 1% fee, which was included in the total.

Although I was pleased with the lower fee from HSBC USA, the lack of transparency was worrisome. It made me wonder how many people use their debit and credit cards to make foreign purchases without considering just how much they are being charged. The disclosure of these fees can sometimes be hard to find, as they are included deep in the fine print.

For example, Citibank's disclosure reads "For each purchase made in a foreign currency, we add an additional FINANCE CHARGE of 3.0% of the amount of the purchase after its conversion into U.S. dollars. This foreign currency transaction fee will be added to the appropriate purchase balance with the foreign currency purchase. The foreign currency transaction fee may cause the annual percentage rate on the billing statement on which the purchase made in a foreign currency first appears to exceed the nominal annual percentage rate."

This is a clear disclosure, but one finds it deep down in the list of other terms and conditions which very few people read. Wells Fargo does a much better job in highlighting these fees, as the disclosure is right in the initial chart describing the costs and fees of the card under the title "Transaction Fee for Purchases."

It is difficult to find a card which charges less than 1%, as this is the standard fee that MasterCard and Visa charge for foreign currency conversion. However, from there credit card companies and banks often tack on an additional fee of up to 3%. Furthermore, you may find additional ATM fees added when you withdraw cash from machines in foreign countries.

Before heading off on your next trip overseas, be sure to call your credit card company or bank 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 your credit card or bank carries fees higher than 1%, consider opening a new rewards account to use for purchases overseas. Hopefully, as more people become aware of these charges and shift their overseas travel spending to cards that don't stick it to you on your holidays or business trips, the credit card companies and banks will realize that these hidden fees just aren't good business.

Sample fees charged for Credit Card Purchases*
American Express 2.5%
Bank of America 3%
Capitol One No Conversion Fee
Citibank 3%
HSBC 1%
JP Morgan Chase 3%
MBNA America 3%
Providian Financial Corp 1%
Wells Fargo 3%


*Note that fees change and Credit.com does not guarantee the rates above will be in effect at the time you seek a credit or debit card account.


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