How to avoid paying international transaction fees as a business

What are international or foreign transaction fees?

If you travel internationally on a regular basis, you’re probably used to being charged an international transaction fee. This is a fee which is applied to every purchase made using a credit card when overseas, and the individual charges can soon add up to a hefty bill. Bear in mind that these are on top of traditional transaction and processing fees, and can also be applied when purchasing items online from another country. 

In simple terms, a foreign transaction fee is a levy charged by the bank which issued the credit card for the task of processing the payment into the local currency.  

How much should you expect to pay in foreign transaction fees?

The first thing to point out when answering this question is that the amount charged will vary from bank to bank and even across different products offered by the same bank. As an average, you can expect to be charged around 3% of the original purchase price. In most cases, 1% of this fee goes to the payment processor, such as Visa or MasterCard, with the other 2% charged by the bank which issued the card.

While 3% may not sound like too much to pay initially, what has to be remembered is that the amount you have to pay in cash terms soon mounts up. Multiple purchases for $60, for example, would each incur a foreign transaction fee of $1.98, while a single $600 purchase would cost $19.80. If you spend two weeks in another country using your credit card as you normally would, then the total fees charged by the time you get back home could be fairly substantial. The same logic applies if you regularly make online purchases from overseas vendors. 

In addition to the transaction fee charged when using a credit card, you’re also likely to be charged a margin on the daily interbank exchange rate for the currency in question, which could be as high as 3–5%. The actual margin is often decided by the card issuer, and you, as the person using the card, often don’t know what that margin is in advance. The margin on the exchange rate, combined with the foreign transaction fee, could mean you have to pay a premium of at least 6% on every purchase you make using your credit card. Clearly, if there are ways of avoiding fees of this kind, they are worth taking advantage of.   

Do all banks charge international transaction fees?

The good news for anyone who needs to make overseas purchases on a regular basis is that it is possible to use cards which don’t charge the fees. The cards in question are usually prepaid debit cards which can be loaded before travel (or prior to making online purchases) and then used without a foreign transaction fee being charged, although some banks also offer credit cards which don’t charge international transaction fees. If you’re looking for banks which don’t charge international transaction fees, what follows is not a definitive list, but provides some of the viable alternatives you can choose from:

Debit cards which don’t charge international transaction fees

• HSBC Everyday Global Account

• Suncorp Everyday Options Account

• Suncorp Carbon Insights Account

• Macquarie Transaction Account

• Citibank Plus Everyday Account

• Suncorp Everyday Essentials Account

• Ubank Spend Account

• Suncorp Everyday Options Sub Account

Credit cards which don’t charge international transaction fees

• Bankwest Breeze Platinum Mastercard

• Coles Rewards Mastercard

• humm90 Mastercard

• NAB StraightUp Card

• Bankwest Zero Platinum Mastercard

• CommBank Low Fee Gold Credit Card

• Westpac Lite Card

• Latitude 28° Global Platinum Mastercard

• CommBank Ultimate Awards Credit Card with Qantas Points

• Westpac Flex Card

For more options and to find out what other perks – such as no monthly fees – which banks include with their payment cards, check out consumer comparison sites such as Finder. At GoCardless we also constantly monitor and update some of the cheapest credit card processing fees for business users.  

How to avoid paying international transaction fees

As detailed above, the best way to avoid paying international transaction fees is to use a credit or debit card which doesn’t charge the fees. Check the terms and conditions of any existing cards you use, to see whether they charge fees and if so how much the fees are. 

Other steps you can take to avoid international transaction fees if you’re travelling abroad include exchanging all of your currency before you travel, as you get a better exchange rate at home than you would in the destination country (with the worst possible option being changing currency at the airport as you’re leaving or arriving). Once you’re abroad and paying by debit or credit card, many merchants offer the option of paying in the local currency.  This is often the better option, and the merchant should be able to make use of a dynamic currency conversion (DCC) which shows the cost in the local currency and Australian Dollars in real time. 

How can GoCardless help

If you’re a business trading on a global basis and receiving payments from abroad, avoiding international transaction fees can become more difficult than for ordinary travellers. Those businesses which partner with GoCardless can take advantage of our international payments service. As the first global bank debit system of its kind, our international payments make it possible to collect recurring payments from customers in more than 30 countries.  A single platform can deal with payments from multiple countries into your business account, and figures show that a $5k transfer using GoCardless is 75% cheaper than one made using PayPal, not least because international payments collected using GoCardless use the real – and fairest – exchange rate.