Foreign transaction fee: What is it and how to avoid 2024

An overseas transaction fee is a percentage charge added to your bill every time you spend in a foreign currency. That might be when you travel, or when you’re shopping online with retailers that are based overseas. Singapore foreign transaction fees can be 3% or more, including a Mastercard or Visa overseas transaction fee and a bank administrative charge. This might make your foreign trips more expensive. So, how can you avoid paying an overseas transaction fee?

This guide walks through what your options are to limit or avoid international card transaction fees.

Plus to help you cut the costs of spending in foreign currencies, we’ll introduce some debit and credit cards that do not have foreign transaction fees such as international debit cards from Wise and Revolut, and credit cards like the Trust Bank credit card.

Quick summary: International transaction fees

• Foreign transaction fees apply when you pay in a foreign currency with a credit or debit card - they’re usually around 3% or more of the transaction value

• You may pay overseas transaction fees when you travel, and when you shop online with overseas merchants - it’s not always easy to see online if the merchant will bill in a foreign currency

• Some Singapore banks and card issuers have debit and credit cards which waive foreign transaction fees

• Foreign transaction fees may apply in addition to other costs associated with using your card abroad, such as currency conversion fees and costs which are built into the exchange rate applied

• International debit cards from Wise offer low conversion fees with mid-market exchange rates, and can be a good option to avoid high overseas transaction fees.

What is a foreign transaction fee?

A foreign transaction fee is a charge added by a bank or card issuer when you make a payment or withdrawal with a credit or debit card in a foreign currency. It’s usually a percentage cost, which is then either added to your credit card bill, or to the amount to be debited from your account if you’re using a debit card for your payment.

How foreign transaction fees work

When you spend in a foreign currency, the bank or card issuer will usually convert your spending back to SGD to be billed to your account. While different cards and providers have their own processes for this, it’ll often mean your spending is converted with the network exchange rate, and a foreign transaction fee is added to the total amount spent. It’s not always possible to see the overseas transaction fee as a separate line on your credit card bill or account statement, which may mean you’re paying this without even realising it when you’re abroad.

You can find details of the foreign transaction fee that applies to your card - if there is one - in your card’s terms and conditions or fee document.

How much are foreign transaction fees?

Where banks and card issuers charge a foreign transaction fee you’ll often find that’s in the region of 3% of the transaction cost. While that sounds like a pretty small amount, it can build up very quickly. If you’re taking a trip overseas and spend 5,000 SGD on your card, your overseas transaction fee in total will come out to 150 SGD - money you could have used to do more while you’re away from home.

Some cards like the Wise debit card, and debit cards from Revolut, do not have foreign transaction fees. These cards are linked to multi-currency accounts you can use to hold a selection of foreign currencies.

With debit cards like Wise and Revolut, if you have the currency balance you need for spending, then there’s no fee - and if you don’t you can convert the balance in your account manually or your card will do it automatically. You may need to pay currency conversion fees for this service, but this can still work out less expensive than paying a foreign transaction fee. We’ll explore this more later.

How to avoid foreign transaction fees

Let’s look at a few handy hints for avoiding foreign transaction fees when you travel and shop online.

• Choose a debit or credit card with no foreign transaction fee - Singapore banks don’t offer much in the way of choice for no foreign transaction fee credit cards, but specialist online providers with multi-currency accounts and debit cards can be a good alternative

• Use a multi-currency account for international spending - multi-currency accounts from providers like Wise and Revolut allow you to hold a balance in dozens of currencies, and spend with no extra fees if you hold the currency you need in your account

• Use cash when spending abroad - you won’t pay a foreign transaction fee when you use cash as you travel. However, other costs are likely to apply such as exchange rate markups and overseas ATM fees. Minimise these using a low cost debit card with a multi-currency card, like the Wise card which offers some free ATM withdrawals monthly

Cards with no foreign transaction fees

You’ll have options for either a debit card or a credit card with no foreign transaction fee - but it’s a good idea to shop around to pick the right one for your specific needs.

Generally, credit cards can be a bit more expensive than debit cards, and can include extra costs like annual charges, interest and penalty fees. However, they’re convenient and mean you can spend now and pay later.

Debit cards on the other hand require you to add money to your account in advance, before you can spend. You can often get a debit card which has no ongoing account fee to pay, including some which offer multi-currency functions which can make it easier to plan and budget for overseas spending and travel. Here are a few no foreign transaction fee cards you may want to consider:

Want to know more? Here’s a quick roundup of some key features of these cards:

Wise debit card: The Wise card is linked to a multi-currency account you can use to hold and exchange 40+ currencies. It’s free to spend a currency you hold in your account, and if you don’t have the currency you need, you can convert in the account or at point of payment, with no overseas transaction fees and conversion from 0.33%

Revolut debit card: Choose a Revolut account, including the Standard plan with no monthly fee, and get a debit card for global spending. Accounts hold 30+ currencies, and all account tiers allow for some weekday currency conversion within the account which may include a Revolut fee - fair usage fees of 0.5% to 1% apply once limits are exhausted

Trust Bank credit card: Trust Bank has launched the first no foreign transaction fee credit card on the Singapore market. There’s no annual fee to pay, and no card issuance or replacement fee. Primary card holders can use their card for cash advances overseas - it’s worth knowing that the interest you pay on spending and cash advances can vary. As with all credit cards, penalties may apply if you don’t repay your bill on time every time.

Is it better to pay in local currency or card currency?

It’s always better to pay in the local currency when you travel, and in the merchant’s local currency when you shop online. Sometimes you’ll find you’re asked by a merchant or at an ATM if you’d prefer to pay in your card currency - SGD. This sounds like a tempting offer as you’d be able to see right away when your purchase is costing in dollars - but it’s actually an expensive choice.

When you pay in dollars, the merchant or ATM can set the exchange rate and fees which apply to your purchase, through something known as dynamic currency conversion (DCC). Usually this means you’ll get a worse rate than the one available from your bank or card issuer, and pay more in the end.

How do I know if my card has foreign transaction fee?

To see if your card has a foreign transaction fee you’ll need to review the card’s terms and conditions, and fee document. These are usually available online, or in the bank’s mobile banking app. If you can’t find the detail you need it’s well worth calling the bank or popping into a branch before you start spending in foreign currencies, to avoid nasty surprises later.

Foreign transaction fee vs currency conversion fee

We’ve mentioned that some providers like Wise and Revolut offer debit cards which are linked to multi-currency accounts. When you spend with a Wise or Revolut card there’s no overseas transaction fee, but you may find there’s a currency conversion charge to pay.

Some debit or credit cards from banks can charge both a foreign transaction fee and a currency conversion fee, which may be bundled together, so it’s worth checking your account terms and conditions carefully before you spend.

Here’s a quick overview of the 2 fee types - foreign transaction fee vs currency conversion fee:

What is an international POS fee?

An international POS fee is the percentage fee you’ll pay when you spend with your card in a foreign currency - when you tap to pay in a store overseas, for example.

Usually the international POS fee will be the same as the overseas transaction fee - but some cards split the fees you pay for using your card overseas to make a payment as a separate cost to the fees used when you make a withdrawal. In this case you may find the fees are explained differently in the card’s terms and conditions document - usually you’ll see an international POS fee and an international cash fee, instead of one single foreign transaction fee.

Conclusion: Foreign transaction fees

Foreign transaction fees can apply on card spending and cash withdrawals in foreign currencies - and may push up your costs by about 3%. While that doesn’t sound like a huge amount it can quickly ramp up, so finding ways to avoid or limit this charge can be handy to keep down costs when you’re abroad.

Few Singapore banks have debit or credit cards which do not charge foreign transaction fees - in fact, Trust Bank markets its credit card as the first no foreign transaction fee card in the country. As an alternative, you can get a multi-currency account from a digital provider like Wise or Revolut, which won’t charge foreign transaction fees and which comes with other helpful tools for managing your money internationally. Use this guide to weigh up a few different no foreign transaction card options and decide which one suits you.