Hidden Travel Fees: How to Avoid Paying More With Credit Cards

Cole Mayer

You’re on your dream vacation, using the money you’ve saved up over what feels like a lifetime, and you’re having a great experience. However, when you get home you start receiving bank statements, everything seems more expensive than you remember.

You notice there’s a foreign transaction fee on every credit card purchase and wonder how you can avoid paying too much when using your credit card overseas.

Transaction Fees

The first fee to be aware of is the transaction fee. For every transaction while abroad, a fee is tacked on – often about 3 percent of the total purchase, or a flat rate of around $1 per transaction. Be sure to check with your credit card lender before traveling to know your credit card’s specific fee.

Using a debit card to get cash from an ATM to get around the fee? Try again, says European travel expert Rick Steves. An ATM transaction fee will be tacked on to your account if you use an out-of-network ATM, plus a percentage for currency conversion, plus a fee from the lender. Some banks won’t charge any fees, however, especially if your bank at home partners with an overseas bank. Again, check on this before traveling. Another important ATM tip: beware skimmers or scams by locals trying to peek at your PIN.

While on the topic of PINs, remember that, especially in Europe, only chip-and-PIN cards are used, both credit and debit.

There are credit cards with no overseas transaction fees, but even these come with a catch all credit cards used abroad face: exchange rates.

Exchange Rates

Credit card lenders calculate exchange rates differently. If you aren’t buying anything expensive, the difference may not mean much to you; a few cents, if anything, or about 0.1 percent. This can add up over lots of transactions, especially with higher-value items. If you are in Italy and buy expensive shoes and clothes, the difference between lenders could give you pause to reconsider which card you will use.

MasterCard is said to have an edge over Visa, in part because — allegedly — MasterCard uses the exchange rate of the day of the transaction while Visa uses the day the transaction posts to your statement. However, this has not been proven, and a test by a traveler found only a small difference between the two cards.


The Value-Added Tax, part of overseas sales taxes, are not exactly a credit card fee, but can feel that way if you are unaware of them. In Europe, for example, the VAT can be a whopping 15 to 25 percent per country.

But, there’s a trick to VAT fees: if the purchase is over a certain amount, between $20 to $300, depending on the country, you can claim the tax as a refund. You must meet the amount in a single transaction, and it must be at a store that participates in the refund (look for a sign in the window or cash register, or just ask an employee). Be sure to have your passport, as you will probably be required to show it. When you make your purchase, have the merchant fill out the necessary paperwork, usually called a “tax-free form.” Attach your receipt. Hold on to the document (unless, as Steves suggests, you try charming the store owner into giving the refund on the stop, if they provide the service).

Finally, at the airport or departure point from the last country on your trip, bring your paperwork and purchases (which you are not supposed to use in-country) to the customs office. Your documents will be stamped, and you can take your stamped documents to a refund service, which will charge a small fee, about 4 percent, and you will receive your refund in local currency. Exchange this later. Or, you can have the refund directly on your card, though it may take a couple billing cycles to appear.

Though you can get the refund in your own currency, the exchange rate is often not in your favor (which is also true when paying any merchant abroad; always choose to pay in the local currency). Other services may require you to mail in the refund; this depends on which VAT service a given merchant uses. Look for the refund on your credit card statement, but recognize that it may be a few months before it appears. There may be about a $40 fee if the refund comes in a foreign currency.

Be warned, however: some goods are ineligible for a refund. For example, hotel bills or cars. While you aren’t supposed to use the items you’ve bought, you may be able to get away with wearing your new shoes, depending on the customs agent’s disposition.

Using this knowledge, you can navigate foreign credit card fees and not have a surprisingly high bank statement when you return from your trip. Instead, you can use the money saved to have a better trip, and then get a small refund just before coming home.

Need more information on credit cards before your trip? Visit our credit card resource center.

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