US credit cards drop foreign fees for desirable international travellers

Five years ago just  a couple of US banks waived foreign transaction fees on their credit cards, with Capital One being the issuer that most prominently and consistently did so. Times have changed. Today, among all 12 largest credit card issuers, 37% of credit cards offered (60 of 163) do not impose a foreign transaction fee.

Banks are dropping foreign transaction fees on many cards. Image by Frankleleon / CC BY 2.0

The fees are charged by American Express, Visa, and Mastercard, and typically range from between 2.7% to 3% of a transaction’s value. A majority of US cards still pass along those fees to consumers. But that may not be true for long.

Competition has led to a decline in passing along the fees to consumers. According to a survey by comparison shopping website CreditCards.com, “four major issuers, Capital One, Pentagon Federal Credit Union, HSBC, and Discover, do not charge any consumer credit cardholders foreign transaction fees, regardless of card type.”

Matt Schulz, senior industry analyst at CreditCards.com, said in an interview: “The credit card business is so competitive at the moment and international travelers are such desirable customers that it makes sense for issuers to slash these fees or dump them altogether.”

Several cards without annual fees and cards aimed at students now come without foreign fees, something that was nearly unheard of previously, according to Bankrate.com, another site offering card comparisons.

As a side note, US credit cards tend to have better exchange rates than bank debit cards.

A survey by another card comparison site, CardHub.com , found that banks’ exchange rates were 7.9% poorer than no-fee credit cards, on average, in dollar-to-euro conversions.

The survey also found that no-fee credit cards had much better exchange rates than Travelex, the world’s largest currency exchange operator. It compared the rates being offered at New York’s John F. Kennedy Airport.