Foreign Transaction Fees Explained

Most credit cards are expensive to use abroad, as the bank will charge a fee on non-sterling transactions. This fee - called a foreign transaction fee or a non-sterling transaction fee - will add an average of 3% to any purchases or cash withdrawals you make when you're traveling. Despite the magnitude of these fees, you may be unaware of them, since the details are often buried deep in a card's terms & conditions. We've researched the market and found a number of No Foreign Transaction Fee cards that won't charge a foreign transaction fee on purchases, cash withdrawals, and in a few cases, both. Anyone who likes to travel can avoid these unnecessary charges - we'll show you what to look for in a credit card when it comes to use abroad.

Table of Contents

  • Overview: A rundown of how foreign transaction fees work, and when you will be charged one.
  • What is Your Card's Foreign Transaction Fee?: Where to find the foreign transaction fee for a credit card
  • Dynamic Currency Conversion: When you buy something overseas, the retailer will give you the option of being charged in sterling or the local local currency. We explain why it's always better to be charged in the local currency.


A foreign transaction fee is a bank charge that appears on your bill after you use your card abroad. Foreign transaction fees (otherwise known as FX fees) may be charged on purchases, cash withdrawals (e.g., from an ATM), or both. The average FX fee on most credit cards is 3% - the exception to this is specialist no-fee travel credit cards. Cash withdrawals from ATMs abroad can become particularly expensive, as you may be charged both a cash withdrawal fee AND a non-sterling transaction fee.

FX Fee on Purchases

The easiest way to understand the process is to look at an example. Imagine that you pay €115 (say this is equivalent to £100) for a dinner in Spain. If you charge this bill to a regular credit card, you'll incur a 3% fee on top of this for the bank to handle the foreign transaction. Therefore, the actual cost of your dinner comes out to be £100 + (0.03 x 100) = £103. There are a number of specialty credit cards that do not charge a foreign transaction fee. Using one of these travel cards will save you 3% on your foreign purchases - so that dinner will cost you £100 instead of £103.

FX Fee on Cash Withdrawals

Cash withdrawals from ATMs abroad can be even more costly. Let's say instead that you withdraw €115 (assume equivalent to £100) from a local ATM. You may be charged both a foreign transaction fee and a cash withdrawal fee. The actual cost to you will be £100 + (0.03 x 100) + (0.03 x 100) = £106. Again, there are some specialist travel credit cards that will not charge either an FX fee or a cash fee, so your withdrawal will just cost you £100. (We say this with the caveat that some ATMs charge a fee for using their machine. This fee has nothing to do with your credit card. This fee will be apparent to you when you try to withdraw cash, as the ATM will alert you before you proceed with the transaction.)

How to Find Out Your Card's Non-Sterling Transaction Fee

The foreign transaction fee can be hard to find, if you don't know where to look. We've found the easiest way is to check the Summay Box on the issuer's web page for your particular credit card. You'll need to scroll to the bottom of the Summary Box. There, you should see a section labeled, "Non-sterling transactions" or "Foreign Usage." Non-sterling transaction and cash withdrawal fees should be listed there. If you do not see a cash withdrawal fee in this section, you may find the relevant information in the "Fees" section above. Remember, for purchases abroad you only worry about the non-sterling (foreign) transaction fee. For cash withdrawals abroad you need to check both the non-sterling (foreign) transaction fee AND the cash withdrawal fee. Specialty travel cards may say "None" for one or both of these fees, which means you won't be charged an extra fee. The following image is from Halifax's travel Clarity Credit Card, showing no fees on purchases or cash abroad.

An image showing that the Halifax Clarity Credit Card charges no non-sterling foreign transaction or cash withdrawal fees
From the Summary Box of the Halifax Clarity Credit Card, showing No Foreign Transaction Fees or Foreign Cash Withdrawal Fees

What is Dynamic Currency Conversion?

By opting to see foreign transactions in pounds sterling, instead of the local currency, you will be subject to Dynamic Currency Conversion (DCC). Using DCC means the retailer or ATM company get to choose what exchange rate to use for your transaction. It is not uncommon for them to add a fee for doing this exchange or for them to set an exchange rate that benefits them, and not you. When you pay for a purchase or withdraw local currency from an ATM while abroad, you will be asked if you want the transaction to appear in pounds sterling or in the local currency - always say the local currency. This way you avoid DCC and instead rely on Visa, Mastercard, or American Express to set your exchange rate. These companies are known for setting fair rates, very close to market.