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Credit card charges 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 raise the alarm bells just yet, because this could be the result of credit card charges for foreign currency transactions, particularly if you do a significant amount of business with vendors based outside your home country. 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). Although these sorts of mark-up fees for foreign currency transactions are mainly applied to travellers, you could face them if you make a purchase from a foreign vendor. So, how much should you expect to pay if you do business with international customers?

Foreign transaction fees from major providers

Credit card charges for foreign currency transactions are likely to 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. Want a little more information about the specific amounts you can expect to pay? 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 multiple ways to avoid credit card charges for foreign currency transactions.

First off, you could set up a business bank account in the country that you’re doing business with. 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. 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.

If you’re taking payments from overseas customers and want to offer a seamless payments solution, GoCardless could be the way forward. It’s a global network for recurring payments that allows you to collect in your customer’s native currency and settle in your own at the real exchange rate without any additional fees or charges ramping up the costs.

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GoCardless Ltd., Sutton Yard, 65 Goswell Road, London, EC1V 7EN, United Kingdom

GoCardless (company registration number 07495895) is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017, registration number 597190, for the provision of payment services. GoCardless SAS (23-25 Avenue Mac-Mahon, Paris, 75017, France), an affiliate of GoCardless Ltd (company registration number 834 422 180, R.C.S. PARIS), is authorised by the ACPR (French Prudential Supervision and Resolution Authority), Bank Code (CIB) 17118, for the provision of payment services.