After Visiting 36 Countries, I'm Sold on the Value of Credit Cards With No Foreign Transaction Fees

I spent 11 months backpacking across over 36 countries, and a no-foreign-transaction fee credit card (and debit card!) was my best money-saving hack on that trip. 

Many credit cards charge a foreign transaction fee between 2% and 5% of the transaction amount when you use your credit card abroad or make purchases in a foreign currency. That might not seem like much, but it can add up if you're a big spender or make frequent or long trips abroad. Finding a no-foreign-transaction fee card lets you get all the benefits of credit cards -- such as convenience and fraud-protection features -- while abroad without racking up unnecessary costs. 

Most midtier and premium travel cards don't charge foreign transaction fees, and come with rewards, perks or travel protections that make their annual fees worthwhile. But if you don't care about perks or travel less frequently, there are plenty of no-annual-fee credit cards that don't charge foreign transaction fees either.

Before I left on my trip, I chose different cards with different travel perks that I found useful. I wanted multiple backup cards in case of emergencies. While more casual travelers probably don't need as many dedicated travel cards as I have, I'd still recommend keeping at least one good no-foreign-transaction fee card on hand. 

What is a foreign transaction fee?

A foreign transaction fee is charged when you make a purchase in a currency other than the US dollar. You'll typically incur the fee when you're outside of the US, but you can also get hit with a foreign transaction fee for an online transaction that's processed in a foreign currency.

The range for these two fees is generally between 2% and 5%, but 3% is the standard rate. 

For example, if you use a credit card that charges foreign transaction fees to pay for a $40 dinner abroad, you'll pay between 80 cents and $2 more, depending on your card's foreign transaction fee rate.

If you're using a card overseas to pay for the occasional souvenir, these charges may not seem like a big deal. But if you're paying for most of a trip's cost with your credit card, those fees can add up.

Can I avoid foreign transaction fees?

The best way to avoid foreign transaction fees is to get a credit card that doesn't charge them. 

To find out if a credit card charges a foreign transaction fee, take a look at the card's terms. You can find them on the card issuer's website. If you don't see one listed, it likely means you don't have to worry. Issuers will typically prominently note it if a card doesn't charge foreign transaction fees.

If your primary credit card charges a foreign transaction fee, you may want to add a dedicated credit card that doesn't charge them.

How to choose the right credit card with no foreign transaction fees 

Many travel credit cards do not charge foreign transaction fees, but the list of potential fees won't stop there. Before opening a credit card with no foreign transaction fees, compare all of your options and watch for other fees you might incur. Some factors to consider include:

• Annual fees: Credit cards that offer more premium perks generally have an annual fee, but often forgo foreign transaction fees. These cards usually come with statement credits, welcome bonuses and discounts to offset the charge. Annual fees can range from $0 to hundreds of dollars, so it's important to weigh whether a card's rewards and benefits provide enough value to justify its cost. 
• Rewards: If you're using your credit card abroad, you may benefit from earning in your rewards categories -- such as dining, gas and entertainment. Make sure you choose a rewards credit card that complements your spending habits. The rewards you earn while traveling may help you save on your next trip.
• Traveling perks: With the right travel credit card, you'll not only benefit from its standard base rewards structure, but some top-tier rewards cards offer other benefits, like trip insurance, boosted travel rewards, TSA PreCheck or Global Entry credits, airport lounge access and more. 

Tips for using a credit card when traveling internationally

International travel can be complicated if you don't take a few extra steps before you leave to minimize the cost of spending money while abroad. 

"Before taking off for a trip, make sure that you have a debit card to access cash at an ATM, which is the easiest and least expensive way to access your money abroad," said Jason Steele, a credit card industry expert. 

And if you're going to use a credit card -- even one with no foreign transaction fees -- you'll want to let your card issuer know you'll be out of the US. Although card issuers no longer require you to inform them when you're traveling abroad, many experts recommend taking this step as a precaution. This ensures your card company knows your transactions are authorized and not fraudulent. 

"Make sure to let the card issuers know the dates you will be traveling and the countries you'll be visiting," Steele said.

 Here are some other steps you should take before hopping on a plane:

• Take at least two credit cards and keep them in separate places, in case your wallet is lost or stolen.
• Sign up for email or text alerts about charges to monitor your card purchases.
• If your card has no transaction fees and you're prompted to choose the payment currency, choose to pay in local rates instead of dollars (it may be called Dynamic Currency Conversion). You'll get your bank's wholesale exchange rate, which would be more favorable than the merchant's.
• Get familiar with the exchange rate for the country you're visiting so you know how much you're actually spending.

Which credit cards work worldwide?

Mastercard, Visa, American Express and Discover are the four major credit card processors. Visa and Mastercard are the two most widely accepted credit cards around the world and are your best bet if you intend to travel overseas and pay for goods with a credit card.

Alternative to credit cards with no foreign transaction fees

If you don't travel outside the US often, a credit card with no foreign transaction fees may not offer the maximum benefits for you. To find a card with the best benefits and perks for you, pick one that aligns with your current spending habits.
If you do travel internationally, a credit card still may not be the best option if you travel to countries whose businesses still conduct most of their transactions in cash. Even in countries where credit cards are widely accepted, some restaurants and small businesses require a minimum purchase -- usually the equivalent of $10 or more -- to accept a credit card. That's why it's a good idea to carry a debit card.

By using your debit card to withdraw cash at an ATM in a foreign country, you'll get the bank's wholesale rate, as long as you decline any currency conversions the ATM offers to make for you. But remember to ask your bank about any international ATM fees before you travel.

How to apply for a credit card without a foreign transaction fee

Follow these steps to apply for a credit card.

• Choose a card that fits into your budget and travel goals.
• Go to the credit card issuer's secure site to fill out the application with the appropriate information, including your name, address, date of birth, Social Security number, income, and monthly rent or mortgage payment.
• Use the card responsibly and always pay on time.

More on credit cards

• Here's How to Get TSA PreCheck for Free
• I Use Travel Credit Card Rewards to Score Thousands of Dollars in 'Free' Trips. Here's How
• Is Your Credit Card Annual Fee Worth It?
• You Can Earn Great Credit Card Rewards Without Paying an Annual Fee. Here's How
• Here's How to Snag Airport Lounge Access for Free

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