When I was an expat I never gave too much thought to the benefits of no-foreign-transaction-fee credit cards. It may sound odd, but this has only recently become a concern for me. In all of my expat and international travels prior to the past few months, I only had one small brush with foreign transaction fees. And even then, that situation was quickly resolved. Thereafter, I continued my travels without any concern about paying fees for foreign transactions.
When I lived in West Africa this was not a problem for me at all. I used cash everywhere I went because credit cards were not accepted in Liberia at most establishments during that time. So I simply made a habit of going to the ATM on a weekly basis to avoid long lines during monthly pay periods.
But I did have one small issue with foreign transaction fees on my American Express card when I moved to the UAE. The first time I used it on a shopping excursion in the country, I noticed these pesky fees on my statement the following month. I was annoyed because I don’t like to waste money so I quickly learned how to avoid paying foreign transaction fees at that time.
I got a credit card through my bank in the UAE and I simply used it while shopping in the country. And, I carried cash with me when traveling abroad. I had a few issues with not having enough cash from time to time when traveling to other countries. But, I would simply go to the ATM to pull out more money. Yes, I incurred foreign transaction fees when using the ATM, but these fixed fees were minuscule in comparison to those on my credit card. So I just lived with it and kept traveling.
It was only recently that paying foreign transaction fees became an issue for me. This was after a second trip to the Dominican Republic (DR) that I made this past March. It was then that I truly realized the value of having a no-foreign-transaction-fee credit card.
WHAT ARE FOREIGN TRANSACTION FEES?
Foreign transaction fees are incurred any time you make a financial transaction that involves the exchange of foreign currency or a foreign financial institute. These types of transactions may include point of sale purchases, online purchases from international merchants, and international ATM withdrawal fees.
A percentage of your purchases are charged a foreign transaction fee when using your card for international transactions. This can range from 1% to 3% with a Visa and Mastercard. However, American Express (my favorite card issuer) charges 2.7% for foreign transaction fees. And this is where I got stumped.
During my first trip to the DR this past December, I used my personal Delta Reserve card which I upgraded to after repatriating back to the US. The benefits of this card are almost exclusively connected to Delta Airlines. Because it offers many benefits including free annual companion tickets and no-foreign-transaction fees, the card carries a $550 annual fee.
Even while carrying this card, I used cash for most of my purchases while I was in the DR. But, as I started to run out of cash I transitioned to using my Delta Reserve card. My goal was to avoid money exchange fees at that point. Fortunately, I had no issues with the card as I did not incur foreign transaction fees.
HOW TO AVOID FOREIGN TRANSACTION FEES
Well, fast forward to March 2021 when I took a business trip to the DR. Again, I traveled with cash. However, there are certain things that you can’t avoid using credit cards for. For me, that was Uber fare. While Uber is super cheap in the country, I was unknowingly paying foreign transaction fees on every ride that I took. This was because I was using my Blue for Business American Express card, which does not come with the benefit of no-foreign-transaction fees.
I didn’t realize that until I got home and looked at my statement. The damage was not too bad, but it taught me a big lesson. I needed to get a no-foreign-transaction fee credit card for my business. I had been eyeing the American Express Business Platinum Card for over a year. But, I was reluctant to get it because it likewise comes with a $550 annual fee.
I didn’t want to give up my Delta Reserve card because I truly enjoy the benefits of this card. At the same time, I didn’t want to pay over $1000 in annual credit card fees. But, this past trip made me realize the benefits of having a no-foreign-transaction-fee business credit card. Aside from carrying cash, this was the simplest way to avoid paying foreign transaction fees.
THE BENEFITS OF NO FOREIGN TRANSACTION FEE CARDS
No foreign transaction fee credit cards typically carry an annual fee. All of them are not as expensive as the premium cards that American Express and other issuers like Chase offer. However, most of them will require an annual fee of around $100 or more.
Though, Capital One does offer quite a few no-foreign-transaction fee credit cards for individuals with good to excellent credit. A few other card issuers also offer no-foreign-transaction fee credit cards that don’t come with an annual fee.
Even if you have to pay an annual fee, there are many benefits of carrying a no-foreign-transaction fee credit card. This is especially the case for expats who live and travel abroad frequently. So if you are debating whether to invest in a fee-based or free no-foreign-transaction fee credit card, here are a few benefits that may be useful for you.
SAVINGS
If you live in a foreign country and/or travel internationally on a frequent basis, no-foreign-transaction fee credit cards are a must-have. They can save you a lot of money over the long haul when it comes to paying fees on foreign transactions. These fees can really add up if you carry and use a card that charges fees when you make foreign transactions.
PROTECTION
Credit cards in general are usually the safer way to go when making financial transactions abroad. You don’t have to worry about your cash getting lost or stolen when using a credit card. You also don’t have to worry about running out of cash. If you use your credit card for most or all of your purchases these things will not be an issue for you. Also, even if you lose your credit card you can easily call the credit card company and have them freeze your card to prevent unauthorized purchases.
Many credit cards that protect you from incurring foreign transaction fees also protect you in other ways. Most of them come with high-end fraud protection that reimburses you for unauthorized purchases. These types of safeguards can also provide you with fraud alerts whenever there is suspicious activity on your card. They can likewise protect you from inflated cash exchange rates when making financial transactions in a foreign country.
TRAVEL REWARDS
Many no-foreign-transaction fee credit cards also come with some nifty travel rewards. You can usually accumulate points that can be used for airline tickets, hotels, rental cars, and other travel expenses. You may even be eligible for cashback rewards with some cards.
While premium, no-foreign-transaction fee credit cards often come with a high-end annual fee they also provide some luxury perks that make them worthwhile. Examples include reimbursement for global entry and TSA PreCheck application fees, lounge access, free baggage check-in, travel credits, rental insurance, etc. If you travel enough, you can easily earn your annual fee amount back while enjoying additional perks with these types of cards.