Before deciding which credit card to apply for, it is vital that you check all the expenses that come along with a credit card. There is a fair chance that these expenses would not be highlighted to you at the time of purchase of the credit card. This makes it all the more important for you to keep an eye on these hidden expenses so that you don’t have anything to regret later.
One such major expense that is most likely to stay out of your eyes is the international transaction charges on your credit card. Let’s understand what this is and how it works.
What are International Transaction Charges?
An amount of money that is charged by the credit card issuing company from the credit card holder, while making a foreign transaction. A foreign transaction is one that is made in the foreign currency or one that is passed through any foreign bank. To process this fee, the issuer has to pay an amount, which is eventually charged from the credit cardholder. The credit card international transaction charges, generally, amount to around 3% (or more) of the transaction amount.
It is important to note that each credit card issuer has a varied foreign transaction fee. This expense is mentioned separately in your monthly credit card statement. There be also be certain credit cards with no foreign transaction fees. Hence, it is absolutely essential to read through all the documents carefully before applying for a credit card.
How much are the International Transaction Charges?
In most cases, the international transaction charges on a MasterCard or a Visa credit card are around 1%. However, the banks/credit card issuing companies add an additional charge on it and ask for around 1.5%-3% from their customers. Hence, the foreign transaction fee varies from one credit card to another.
As per the guidelines, it is mandatory for credit card companies to disclose the foreign transaction fees on the specific credit card in the agreement beforehand. Hence, you must read all the credit card-related documents thoroughly before applying. You can also find all these details on the official website of the credit card issuing company.
It must be noted that there are also a few credit cards that do not apply to any foreign transaction fee. However, such types of credit cards are only limited and must be well-researched upon. Doing so would be helpful for you only if you require frequent international travel or shop on international websites quite often.
Charges Applicable on International Transactions
International transactions charges are applicable on a credit card in the following situations-
- Retail transactions made outside of Indian borders
- Online transactions made in a foreign currency
- Overseas cash withdrawals using a credit card
- Purchases made with POS machines that are linked to international accounts; for example- transactions made at Duty-free stores
- Other transactions that are made in a foreign currency
- An additional 18% GST is applicable on all the international transactions
- Failing to clear your dues involving foreign transactions will result in finance charges at around 23% to 42%
How to Avoid International Transaction Charges?
Even though there’s not much that you can do to avoid credit card international transaction charges; especially if you are making a foreign transaction. However, you can still try the following ways to get rid of your foreign transaction fee-
- Try using a debit card instead of a credit card for your foreign transactions
- If traveling abroad, use a prepaid travel card that has the currency of your need
- Buy a credit card that has zero international transaction charges
- Before traveling overseas, exchange your money for foreign cash and avoid making payments with your card
- Look for the best credit card for overseas spending