What are foreign transaction fees and how do they work?

When you make a purchase in another currency, some banks and card companies charge a fee to facilitate the transaction. And while fees on foreign transactions are common, some financial institutions offer this service at no extra cost.

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What is a foreign transaction?

A foreign transaction is an electronic payment made in a currency other than your own. Here are some types of foreign transactions:

ATM withdrawals in a foreign country
Online card payments in currencies other than your banking currency
Payments made while abroad
International money transfers

Foreign transaction fees‌: A breakdown

Foreign transaction fees are often charged by a bank or card company on any transaction made outside your currency or region of use. The total fee charged is generally broken down into two parts.

First, there’s a currency conversion fee for transferring the money from one currency to another, typically around 1%.
Second, there’s the transaction processing fee (usually around 2%) charged by the bank or card company for providing an international service.

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Why do we pay foreign transaction fees?

Foreign transaction fees are designed to cover the cost of converting one currency into another. Unlike standard transfers, transfers between currencies are complex, involve more channels, and take longer — often resulting in higher fees. If you’re planning to send money abroad, it’s worth taking currency conversions and transaction fees into account to avoid any unpleasant surprises. Learn more about transaction fees abroad and how they work here.

Avoiding extra foreign transaction fees abroad

There are several ways to avoid extra foreign transaction fees. For example, try bringing a no-fee debit card when you travel, withdrawing currency ahead of your trip, and avoiding multiple visits to foreign ATMs. It’s also a good idea to pay cash in the local currency to sidestep any transaction fees on site.

Foreign transactions‌ and ‌currency exchange rates

In addition to watching out for high foreign transaction fees, it’s important to consider currency exchange rates when making payments abroad. These rates are based on global trade markets and are used to calculate the sender’s currency into the recipient’s. Need a refresher on foreign currency exchange? Check out our handy guide here.

Do all companies charge foreign transaction fees?

Not all banks or card companies charge foreign transaction fees‌ — ‌some absorb the costs themselves. To learn what fees you might be subject to, check with your bank or card issuer. At N26, all account holders can make card payments overseas for free, with no foreign transaction fees on top. Discover all the N26 benefits of our accounts here.

Get ‌free payments worldwide and no hidden fees with N26

At N26, all our accounts feature free card payments worldwide — as often as you like and with no foreign transaction fees. N26 You and Metal account holders can withdraw cash for free at foreign ATMs, while customers with Standard and Smart accounts are charged a fixed 1.7% conversion fee on the withdrawal amount.

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N26 You and Metal: Get unlimited free ATM withdrawals abroad

As an N26 You or Metal customer, not only can you enjoy unlimited free card payments globally, you can also withdraw cash in any currency as often as you want — free of charge. You’ll also get real-time exchange rates when making international transfers. Plus, you’ll benefit from a travel insurance package that includes trip cancellation and medical coverage.