Foreign transaction fee: What is it and how to avoid
A foreign transaction fee is a percentage charge added to your bill every time you spend in a foreign currency. That might be when you travel, or when you’re shopping online with retailers that are based overseas. Malaysian foreign transaction fees can be around 2.25%, adding to the costs of spending in foreign currencies and making overseas trips more expensive. So, how can you avoid paying a foreign transaction fee?
This guide walks through what your options are to limit or avoid international card transaction fees. Plus to help you cut the costs of spending in foreign currencies, we’ll introduce some debit and credit cards that do not have foreign transaction fees such as international debit cards from Wise, and credit cards like the HLB I'm Card.
Quick summary: International transaction fees
Foreign transaction fees apply when you pay in a foreign currency with a credit or debit card - they’re usually around 2.25% of the transaction value, and may be split into a fee paid to the card network, and a fee paid to the bank
You may pay foreign transaction fees when you travel, and when you shop online with overseas merchants - it’s not always easy to see online if the merchant will bill in a foreign currency
Some Malaysian banks and card issuers have debit and credit cards which waive foreign transaction fees
Foreign transaction fees may apply in addition to other costs associated with using your card abroad, such as currency conversion fees and costs which are built into the exchange rate applied
International debit cards from Wise offer low conversion fees with mid-market exchange rates, and can be a good option to avoid high foreign transaction fees.
What is a foreign transaction fee?
A foreign transaction fee is a charge added by a bank or card issuer when you make a payment or withdrawal with a credit or debit card in a foreign currency. It’s usually a percentage cost, which is then either added to your credit card bill, or to the amount to be debited from your account if you’re using a debit card for your payment.
How foreign transaction fees work
When you spend in a foreign currency, the bank or card issuer will usually convert your spending back to MYR to be billed to your account. While different cards and providers have their own processes for this, it’ll often mean your spending is converted with the network exchange rate, and a foreign transaction fee is added to the total amount spent. It’s not always possible to see the foreign transaction fee as a separate line on your credit card bill or account statement, which may mean you’re paying this without even realising it when you’re abroad.
You can find details of the foreign transaction fee that applies to your card - if there is one - in your card’s terms and conditions or fee document.
How much are foreign transaction fees?
Where banks and card issuers charge a foreign transaction fee you’ll often find that’s in the region of 2.25% of the transaction cost. While that sounds like a pretty small amount, it can build up very quickly. If you’re taking a trip overseas and spend 10,000 MYR on your card, your foreign transaction fee in total will come out to over 200 MYR - money you could have used to do more while you’re away from home.
Some cards like the Wise debit card, do not have foreign transaction fees. These cards are linked to multi-currency accounts you can use to hold a selection of foreign currencies.
With debit cards like Wise, if you have the currency balance you need for spending, then there’s no fee - and if you don’t you can convert the balance in your account manually or your card will do it automatically. You may need to pay currency conversion fees for this service, but this can still work out less expensive than paying a foreign transaction fee. We’ll explore this more later.
How to avoid foreign transaction fees
Let’s look at a few handy hints for avoiding foreign transaction fees when you travel and shop online.
Choose a bank issued debit or credit card with no foreign transaction fee - there are some travel credit cards which offer no foreign transaction fee, which can also have ways to earn rewards as you spend
Use a multi-currency account for international spending - multi-currency accounts from providers like Wise allow you to hold a balance in dozens of currencies, and spend with no extra fees if you hold the currency you need in your account
Use cash when spending abroad - you won’t pay a foreign transaction fee when you use cash as you travel. However, other costs are likely to apply such as exchange rate markups and overseas ATM fees. Minimise these using a low cost debit card with a multi-currency feature, like the Wise card which offers some free ATM withdrawals monthly
Cards with no foreign transaction fees
You’ll have options for either a debit card or a credit card with no foreign transaction fee - but it’s a good idea to shop around to pick the right one for your specific needs.
Generally, credit cards can be a bit more expensive than debit cards, and can include extra costs like annual charges, interest and penalty fees. You may also need to be a specific high wealth customer to access a credit card with no foreign transaction fee. However, if you’re eligible, they’re convenient and mean you can spend now and pay later.
Debit cards on the other hand require you to add money to your account in advance, before you can spend. You can often get a debit card which has no ongoing account fee to pay, including some which offer multi-currency functions which can make it easier to plan and budget for overseas spending and travel. Here are a few no foreign transaction fee cards you may want to consider:
| Provider | Foreign transaction fee | Exchange rate | Currency conversion cost | Other fees |
|---|---|---|---|---|
| Wise card | No foreign transaction fee | Mid-market exchange rate | From 0.33% | 13.7 MYR card order fee |
| OCBC Debit Card | No foreign transaction fee | Network rate which may include a fee | Costs are built into the rate applied by the network | 8 MYR registration fee 8 MYR annual fee |
| HLB I'm Card | No foreign transaction fee | Network rate | Costs are built into the rate applied by the network | 5% cash advance fee if you make a cash withdrawal Interest and penalty fees can apply |
| OCBC Premier Voyage Credit Card | No foreign transaction fee | Network rate | Costs are built into the rate applied by the network | 750 MYR annual fee Interest and penalty fees can apply |
Want to know more? Here’s a quick roundup of some key features of these cards:
Wise debit card: The Wise card is linked to a multi-currency account you can use to hold and exchange 40+ currencies. It’s free to spend a currency you hold in your account, and if you don’t have the currency you need, you can convert in the account or at point of payment, with no foreign transaction fees and conversion from 0.33%
OCBC debit card: OCBC does not have a foreign transaction fee for Mastercard and PayNet debit cards, including the debit card-i options. Your overseas purchase costs are converted back to MYR at the network's exchange rate - which may include a fee - to calculate how much will be debited from your OCBC account to cover the cost.
HLB I'm Card: The HLB I’m Card is a credit card with no annual fee, which has the standard HLB foreign transaction fee waived for overseas purchases. You’ll need to be 21 or over to apply, with an annual income of at least 24,000 MYR. It’s worth noting that as with any credit card, you’ll need to repay in full and on time, every time, to make sure you avoid interest and penalty charges. Cash advance fees of at least 20 MYR apply if you use this card to make a cash withdrawal.
OCBC Premier Voyage Credit Card: This card is marketed as a specific travel card for high wealth individuals, and is available by invitation only. It comes with lots of perks, including no foreign transaction fee, lounge access, rewards and air miles. It’s a pretty exclusive club, but if you’re eligible this could mean you earn as you spend. A high annual fee of 750 MYR applies.
Is it better to pay in local currency or card currency?
It’s always better to pay in the local currency when you travel, and in the merchant’s local currency when you shop online. Sometimes you’ll find you’re asked by a merchant or at an ATM if you’d prefer to pay in your card currency - MYR. This sounds like a tempting offer as you’d be able to see right away when your purchase is costing in pounds - but it’s actually an expensive choice.
When you pay in pounds, the merchant or ATM can set the exchange rate and fees which apply to your purchase, through something known as dynamic currency conversion (DCC). Usually this means you’ll get a worse rate than the one available from your bank or card issuer, and pay more in the end.
How do I know if my card has foreign transaction fee?
To see if your card has a foreign transaction fee you’ll need to review the card’s terms and conditions, and fee document. These are usually available online, or in the bank’s mobile banking app. If you can’t find the detail you need it’s well worth calling the bank or popping into a branch before you start spending in foreign currencies, to avoid nasty surprises later.
Foreign transaction fee vs currency conversion fee
We’ve mentioned that some providers like Wise offer debit cards which are linked to multi-currency accounts. When you spend with a Wise card there’s no foreign transaction fee, but you may find there’s a currency conversion charge to pay.
Some debit or credit cards from banks can charge both a foreign transaction fee and a currency conversion fee, which may be bundled together, so it’s worth checking your account terms and conditions carefully before you spend.
Here’s a quick overview of the 2 fee types - foreign transaction fee vs currency conversion fee:
| Foreign transaction fee | Currency conversion fee |
|---|---|
Added by bank and card issuers when spending in foreign currencies Usually a percentage fee Must be specified in your account fee schedule | May be charged by a bank, digital specialist provider or card network Can be added into the foreign transaction fee Can apply when paying in a foreign currency or converting currencies in a multi-currency account |
What is an international POS fee?
An international POS fee is the percentage fee you’ll pay when you spend with your card in a foreign currency - when you tap to pay in a store overseas, for example.
Usually the international POS fee will be the same as the foreign transaction fee - but some cards split the fees you pay for using your card overseas to make a payment as a separate cost to the fees used when you make a withdrawal. In this case you may find the fees are explained differently in the card’s terms and conditions document - usually you’ll see an international POS fee and an international cash fee, instead of one single foreign transaction fee.
Conclusion: Foreign transaction fees
Foreign transaction fees can apply on card spending and cash withdrawals in foreign currencies - and may push up your costs by about 2.25%. While that doesn’t sound like a huge amount it can quickly ramp up, so finding ways to avoid or limit this charge can be handy to keep down costs when you’re abroad.
Some Malaysian banks have debit or credit cards which do not charge foreign transaction fees. Or, as an alternative, you can get a multi-currency account from a digital provider like Wise, which won’t charge foreign transaction fees and which comes with other helpful tools for managing your money internationally. Use this guide to weigh up a few different no foreign transaction card options and decide which one suits you.
International transaction fees FAQs
If you see a fee called an intl txn fee (international transaction fee) in your card statement, this refers to the foreign transaction fee you’ve been charged for using your card in a foreign currency. This fee is commonly around 2.25%, although some card providers do waive or reduce this cost.
Card issuers and banks set their own foreign transaction fees, so your Mastercard debit or credit card might have a fee for overseas spending, depending on the bank’s policy. Compare a few options to find a Mastercard with no foreign transaction fee - digital providers like Wise can be handy, with debit cards you can use all over the world with no extra international transaction charge.
Some Visa cards have foreign transaction fees - whether or not your card will impose this charge will depend on the bank or provider that issued it. Read the card’s terms and conditions carefully to spot all the possible fees that might apply.
If you have a no foreign transaction fee card, your overseas card spending will be converted back to MYR using the network, bank or provider exchange rate, without an extra foreign transaction fee added. This doesn’t necessarily mean it’s free to spend overseas though - other costs can apply such as currency conversion fees. Choosing a low cost debit card from providers like Wise can be a smart way to keep down your card spending fees overall.
If your card does not charge a foreign transaction fee your purchase or withdrawal will be converted back to MYR using the network, provider or bank exchange rate. This may not be the same as the rate you find on Google. To see which rate will apply to your card, check your account agreement - some multi-currency accounts from providers like Wise offer currency exchange with the mid-market rate, which is the one you’ll find on Google, and low or no conversion costs.