Credit card charges for foreign currency transactions
Last editedSep 20223 min read
Credit card mark-up fees for foreign currency transactions are typically charged at between 2% - 3% of the value of the transaction. These foreign currency exchange fees are usually levied on each transaction by credit card providers.
Mark Up Fee for Foreign Currency Transactions
Ever made a purchase for your company and noticed that the final bill is a little more than what you were expecting?
Don't be too alarmed, as this will almost certainly be credit card charges for foreign currency transactions, particularly if you do a significant amount of business with vendors based outside your home country.
Bear in mind that if you have overseas customers, they could also face additional costs from foreign exchange fees, depending on your payment process.
Find out more about credit card charges for foreign currency transactions with our helpful guide.
What is a foreign transaction fee?
Foreign transaction fees also referred to as FX fees, are surcharges that are applied to your bill when you make a purchase in a currency that isn’t GBP or when your purchase passes through a foreign bank.
The mark-up fee for foreign currency transactions is usually split into multiple parts: a certain portion goes to the processor (i.e. Mastercard or Visa), and another portion goes to the issuing bank (i.e. Bank of America).
So, how much should you and your overseas customers expect to pay if you do business internationally?
Foreign transaction fees from major providers
Credit card charges for foreign currency transactions will likely vary depending on your provider. On average, the fee will be around 3%.
So, if you place an order worth around $2,000 with a US company, you may need to pay an extra $60 in mark-up fees for foreign currency transactions.
Although that might not sound like much, credit card charges for foreign currency transactions can quickly mount up when you’re making large numbers of purchases.
Here are the current mark-up fees for foreign currency transactions from some of the UK’s major banks and credit card providers:
Mastercard foreign currency transaction fee – Mastercard is reported by ValuePenguin to charge a typical fee of 1%. However, they do offer a range of no foreign transaction fee credit cards that could help to bring your fees down.
Visa foreign currency transaction fee – Like Mastercard, Visa is reported to charge around 1% in foreign transaction fees.
HSBC foreign currency transaction fee – With HSBC, foreign transaction fees are typically 2.75% for debit cards and 2.99% for credit cards.
NatWest foreign currency transaction fee – According to NatWest, they charge a foreign (non-Sterling) transaction fee of 2.75%.
Bank of America foreign currency transaction fee – With Bank of America, foreign transaction fees are around 3%.
Avoiding credit card charges for foreign currency transactions
Budgeting for mark-up fees for foreign currency transactions isn’t ideal, and if doing business with foreign vendors is unavoidable – for example, you can only get a certain type of service or product from a business based overseas – it’s going to eat into your company’s bottom line.
However, there are several ways to avoid credit card charges for foreign currency transactions.
1. Open a business bank account in the country
First off, you could set up a business bank account in the country where you have suppliers
So, if you’re based in the UK but making lots of purchases from US-based companies, setting up a business bank account for the USA could be a great idea. This way, you can bypass the foreign transaction fees and boost your bottom line.
However, to open a US bank account, you will need a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN), and as a non-resident, these are difficult and time-consuming to secure.
2. Foreign exchange fee-less credit card
You could also look into no foreign transaction fee credit cards, which are essentially credit cards that don’t charge additional fees for foreign transactions. Many different credit card providers offer these types of cards, including Mastercard.
Apart from the time involved in researching, applying for, and getting everything set up, it's important to consider that typically there will be terms, conditions, and other charges attached to these types of cards that you need to be aware of.
3. Collect international payments via GoCardless
If you’re making payments to vendors or taking payments from customers overseas and want to offer a seamless payments solution, GoCardless could be the way forward.
GoCardless offers merchants a global network for one-off and recurring payments that allows you to collect in your customer’s local currency (e.g. Dollars) and settle in British Pounds.
GoCardless has partnered with Wise to allow all merchants to convert foreign currency at the real exchange rate without any additional fees or charges.
With a quick and easy setup and the ability to automate payment collection, GoCardless saves you time as well as money when it comes to doing business internationally.
Learn more about accepting international payments with GoCardless.
Case Study - Pete Nicholls, Hub Do
Pete Nicholls runs the marketing agency Hub Do which operates internationally in the UK, Europe, the US, and Australia.
Using GoCardless to collect bank payments in local currencies saves the agency money on transaction fees compared to charges on the card payments they previously accepted.
Pete also uses GoCardless to automate payment collection, eliminating late payments with invoice payments automatically collected on their due date.
Using the multiple software integrations available with GoCardless, Pete has also been able to automate bank reconciliation via Xero and further optimise the international payment process through integration with Wise.
Switching to GoCardless from card payments has allowed Pete and Hub Do to:
eliminate late payments
save time on financial admin
save money on transaction fees
focus on growth rather than cash flow
Watch Pete talk about how easy it is to collect international payments:
