Key takeaways
- Most foreign transaction fees run between 1% and 3% of each purchase; many travel cards charge none.
- US card issuers must disclose foreign transaction fees in the rate and fee table under Regulation Z.
- The fee can apply to online purchases from foreign merchants, even if you never leave the US.
- On a business purchase, the fee is an ordinary business cost. Record it as its own line. See IRS Publication 334.
What is a foreign transaction fee?
You tap your card at a café in Rome, book a London hotel online or pay a Canadian software company. A few days later, your statement shows the purchase plus a small extra line, often labeled “foreign transaction fee” or “international transaction fee.” That’s the issuer’s charge for processing a purchase outside the US or in another currency.
The fee is separate from the exchange rate. The rate converts the price into dollars; the fee is added on top. On some statements the fee appears as its own line; on others it’s included in the converted amount and shown only in the transaction details, so look closely.
Track foreign purchases and the fees that come with them using the Manage Receipt app.
For a freelancer who travels twice a year, the fee is small. For a business that pays foreign contractors, hotels or software every month, 3% of every foreign purchase adds up to real money.
Typical fees
| Card type | Typical fee | Notes |
|---|---|---|
| Many standard credit cards | About 3% | Often part network fee, part issuer fee |
| Some cards and debit cards | 1% to 3% | Debit cards may add an ATM fee abroad |
| Travel and many business cards | 0% | Check the rate and fee table before you travel |
Card issuers have to show this fee in the rate and fee table that comes with the card. Look for a line called “foreign transaction” under transaction fees.
Is a foreign transaction fee tax deductible?
If the purchase is a business expense, the fee is generally deductible too. It’s part of the ordinary and necessary cost of buying that item or service. A fee on a client dinner in Toronto follows the dinner; a fee on a personal souvenir isn’t deductible.
Most small businesses record the fee under bank or card charges, or add it to the cost of the item it relates to. Fees on business meals are a gray area, because meals are generally only 50% deductible, so ask your tax professional which treatment to use and then apply it consistently. Employees generally can’t deduct unreimbursed work costs on their federal return, so ask your employer to reimburse the fee instead.
How to record it
You pay a hotel in Paris €250 on your card. The card converts it to $292.50, and adds a 3% foreign transaction fee.
| Expense line | Category | Amount |
|---|---|---|
| Hotel, Paris (€250 converted) | Lodging | $292.50 |
| Foreign transaction fee (3% of $292.50) | Bank and card fees | $8.78 |
| Total charged | $301.28 |
$292.50 × 0.03 = $8.775, rounded to $8.78. The two lines together match the card statement.
On an expense report, list the fee as a separate line with the statement showing it attached, since the hotel receipt only shows the euro amount. That way the reviewer can match every dollar to the travel cost it came from.
How to avoid foreign transaction fees
- Use a card with no foreign transaction fee for travel and foreign vendors.
- When a card machine abroad offers to charge you in dollars, compare the rate first; the merchant’s conversion is often less favorable than your card’s.
- Check the fee on your business card before booking foreign hotels or software.
- Avoid frequent small ATM withdrawals abroad; fees add up per withdrawal.
- Ask foreign vendors if they can bill in US dollars.
Even with a no-fee card, you still pay the exchange rate set by the card network, so the dollar amount won’t match a rate you saw online exactly. That’s normal. Record what the card actually charged.
Converted amount and fee, side by side
Scan a foreign receipt and Manage Receipt converts the amount to dollars, so you can log the purchase and the card’s foreign fee as separate lines. The receipt stays attached to the expense report, and the totals match your card statement when your accountant or manager checks them.
Explore Currency ConversionFrequently asked questions
Are foreign transaction fees tax deductible?
Yes, when they’re charged on a business purchase. The fee is an ordinary and necessary cost of that purchase, so it’s generally deductible along with it. Fees on personal purchases aren’t deductible. Employees usually can’t deduct unreimbursed work costs, so they should claim the fee from their employer.
Where do foreign transaction fees go on an expense report?
List the fee as its own line, separate from the purchase, under a category such as bank or card fees. Attach the card statement showing the fee, since the merchant’s receipt only shows the foreign amount. Some employers prefer the fee added to the related travel expense, so check your policy.
How much is a typical foreign transaction fee?
Most cards that charge one take about 1% to 3% of each purchase, with 3% common on standard credit cards. Many travel and business cards charge nothing. Your card’s rate and fee table shows the exact fee, as federal rules require issuers to disclose it.
Do I pay a foreign transaction fee when shopping online?
You can. Many cards charge the fee when the merchant is based outside the US, even if the price is shown in dollars and you never leave home. Check where the seller processes payments, or use a card with no foreign transaction fee for overseas vendors.
Is a foreign transaction fee the same as a currency conversion fee?
Not exactly. A foreign transaction fee is your card issuer’s charge on foreign purchases. A currency conversion fee can also come from a merchant or ATM that converts the price into dollars for you. You might pay both on one purchase, so check the receipt and your statement.