Foreign transaction fees will soon be a thing of the past. Photo: Shutterstock
International travel is getting slightly cheaper these days, not because the cost of tickets or hotels is going down, but because many credit card issuers are getting rid of foreign transaction fees. If you’re not familiar with the concept, the fees are added on to purchases made outside of the United States, and usually range from 1 to 3 percent of the value of the purchase. That’s essentially like paying an extra tax, except the money is going to whoever issued your credit card.
In recent years, during which there has been an increase in international travel by Americans, some companies are getting rid of the fees on certain cards or on all their cards across the board. In 2010, 91 percent of credit cards, issues by the 12 largest banks, had such fees, but now that number has dropped to 57 percent, and it’s likely that it will keep going down.
International travel rates don’t just climb each year; they normally go in cycles. While we’re in an upward trend right now, that will likely drop off in the future. In the meantime, more people are going overseas and more often, and they’re using credit cards. But those fees, when they do exist, don’t really generate all that much money for the issuers, who make most of their profit off of interest. Lower, fewer, or no fees results in people using their credit cards more often, which means more transactions, more interest, and so forth. It’s good for the banks.
It’s also, quite obviously, good for travelers as well. If the average overseas traveler spends $816 per trip on their credit card, and travels abroad 2.6 times a year, they can save up to $64 a year by not having to pay those fees. That may not sound like a lot, but for people who travel more often or for whom money is tight, that can make a big difference.
