How to Avoid Sneaky International Transaction Fees
Are you planning a much-deserved trip abroad? Or have you just returned from a lovely relaxing holiday, only to be shocked when opening your card statement? What in the world are all these extra fees?!!
I’ve been there myself. I had no idea an innocent online shopping spree or overseas trip could come with so many “uninvited guests”.
I was shocked to see the many unexpected charges for each transaction, and I didn’t understand why until I started digging deeper into the sneaky fees banks can charge.
In this post, I’ll cover what I learned and give you all you need to know about foreign transaction fees, including:
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What is an International Transaction Fee?
An International transaction fee can refer to multiple fees that banks and institutions charge you when you make a purchase while overseas or when buying online.
Explicitly speaking, though, it's usually a 3% charge from your bank to process the transaction abroad.
Even when buying online from an Australian site, ‘.com.au’, your bank may still charge you the foreign transaction fee if the transaction is processed through an online service that is based overseas.
You’re subject to these fees anytime you make a purchase, like buying a coffee with your card or withdrawing cash from an overseas ATM.
What Are the Common Overseas Fees Charged by Australian Banks?
|Type of Fee
|International Transaction Fee
|3% of transaction value
|Overseas ATM Fee
|$5 per withdrawal, plus
3% of transaction value
|Exchange Rate Margin
|Varies between 3% and 15%
International Transaction Fee
The International transaction fee is the 3% charge your bank will charge you when you purchase overseas or even when withdrawing cash at an ATM.
Overseas ATM Fees
Your bank can charge you fees when you use your card to withdraw cash from an overseas ATM. The overseas ATM operator/owner will also likely charge you their own fees on top of that.
Each bank is different, and some banks have partner banks abroad, which waive or reduce the fees. So it's essential to check with your bank before you travel.
We found that the most common ATM fees you may encounter are
- A flat fee of $5
- 3% of the transaction value (foreign transaction fee)
- An exchange rate margin that varies between 3% and 15%
So, if you are taking out $100 worth of currency overseas, you are most likely paying over $10 in bank fees if you use an Australian bank card.
Foreign Currency Conversion Fees
Whenever you make a purchase in other countries, whether physically there on an overseas holiday or shopping online, your Australian dollars need to be converted to complete the transaction with the foreign merchant.
The financial institution or entity processing the currency conversion usually charges a fee for converting the currency, which varies. However, it is common that some will waive this fee, and it is best to check beforehand.
Also, keep in mind that this foreign currency conversion fee can also apply to any other fees charged by the overseas bank or vendor for that transaction.
Currency Exchange Rate
Currency exchange rates are the value at which one currency will be traded for another, determined by global forex markets.
Australian banks charge customers based on a marked-up version of this rate, known as their own exchange rate. This markup or margin is one way banks profit from currency exchange.
The exchange rate depends on the current figure determined in the foreign exchange market, which fluctuates regularly depending on which currency pair you are exchanging.
How to Avoid International Transaction Fees and Save Your Hard-Earned Money
I’m sure you’re bummed after hearing all the fees you could be up for. I know I was when I first looked into it. It can take the fun out of your holiday.
Don't stress. We've looked into the many ways you can avoid excessive fees and distilled the best for you here.
Change your Currency Before Travelling
The most straightforward way to avoid fees on each transaction is to bring cash with you. All you have to do is convert your Australian dollars to the foreign currency of the country or countries you plan to travel to.
You can convert your currency either online, and have your money delivered directly to you, or in-store.
Online money exchangers like S Money are often an easy and cheap way to buy foreign currency. You usually only pay a small fee and the currency exchange rate, no hidden fees!
Debit Cards and Travel Cards With No International Fees
Several institutions offer debit cards with no international fees and products designed for travel and online purchases. They remove the international transaction fee, have low costs, competitive currency conversion rates and offer free ATM withdrawals.
Neo Banks are a newer breed of bank. They are digital only, which means they have fewer overheads and can pass the savings on to customers.
A great example of a Neo Bank is Up Bank. Up Bank offers no international transaction fees and allows free ATM withdrawals overseas. It is a top pick for Aussies looking to avoid sneaky bank fees when travelling or shopping online abroad.
Customers praise Up Bank’s easy sign-up process, mobile app for tracking spending, and partnership with Wise for international money transfers.
Travel-Friendly Banks and Institutions
Many of my friends, who are avid travellers, often recommend ING as an excellent bank for overseas trips.
ING has the ING Orange Everyday account and cards, which offer rebates on international transaction fees and some ATM withdrawal fees when you meet eligibility criteria.
Although ING recently removed rebates on overseas ATM operator fees, you can still benefit from unlimited rebates on the 3% international transaction fee and five rebated ING ATM withdrawal fees monthly.
There are certain credit cards with no international fees are available. These can be a great option in some circumstances, especially if you intend to accumulate and use rewards points.
We recommend bringing a credit card for emergencies or a backup only. Due to cash advance interest charges, it can get costly if you withdraw cash from an ATM.
Don’t Use International ATMs Without Checking Fees First
Your best bet to avoid international transaction fees is to go with a fee-free product or bring cash with you. But it’s not always possible, depending on where you travel, nor is it safe to carry a large amount of money.
So you could withdraw cash at ATMs as you travel, but beware, this can be costly. Not only will your bank charge you fees for withdrawing cash, but the overseas ATM operator will charge their fees on top for using their ATM.
Ideally, You would want to find a card with no overseas ATM withdrawal fees. However, not all products offer this option, and if they do it is usually limited to a number of withdrawals or amount you can withdraw before you start paying fees.
ATM Partner Networks
Some banks partner with overseas institutions in popular destinations like USA, the UK and the like. They do so to pass savings onto their customers as long as they use an ATM within their network of Banks.
A bank that is aligned with a good network is Westpac. They are part of the Global ATM Alliance.
While Westpac’s International fees can be pretty high, if you know which ATMs are under this alliance, you can at least save money on ATM withdrawal fees.
We’ve covered all you need to know about International transaction fees, including some not-so-obvious and sneaky fees your bank might charge you.
Now, you have quite a few choices and ideas on how to avoid International transaction fees.
It doesn’t matter whether you bank with NAB, CommBank or Citibank; do your research and plan before your trip, and you’ll have plenty of hard-earned cash left over for those holiday cocktails on the beach.
Where will you go on your next holiday?