Everything to Know about Foreign Transaction Fees

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If you’ve ever used your credit card outside the country, then you have already paid foreign transaction (FX) fees. You’ll find this charge included in the pages of Terms and Conditions of your credit card. What is foreign transaction fee? Is it always the same? We’ve compiled this guide with all the questions you may have about foreign transaction fees and how they are applied.

  • Overview: Basic information on foreign transaction fees and how you can find the relevant information in your credit card agreement.
  • Dynamic Currency Conversion: When you shop in a foreign country, you can pay using SGD instead of the local currency. This is a bad idea and we explain why we advise you against it. 

An Overview of Foreign Transaction Fees 

A foreign transaction fee is an extra charge you have to pay when you buy something overseas, make a payment that is processed by a foreign bank or purchase something in a currency other than the Singapore dollar (SGD). A foreign transaction fee which is often referred to as an FX fee is generally around 2.5%–3.5% of your payment. 

A foreign transaction fee contains two sections. One part of the fee is charged by a credit card network such as Visa or MasterCard, while the other part is charged by the card issuer company (Citibank, OCBC, HSBC, etc.). Visa and MasterCard charge 1% fees for all transactions, for all types of credit card. The fees that card issuers charge depend on your specific credit card. Ultimately, foreign transaction fees are generally between 1.5%-2.5%, though some card issuers absolve their own fee to offer you a lower FX transaction rate. 

To help you understand how transaction fees work, here is an example.

Imagine that you are on vacation in Netherlands. Using your UOB One Card you pay a S$100 for a lunch. First, the credit card network of your card–in this case, Visa–will charge 1% of the bill you paid which is S$1. Then your card issuer, UOB, will charge 1.8% on your bill which is S$1.8. So, in total you will be paying $100 + (0.01*100) + (0.018*100) = $102.8.

Exchange rates are also be applied in foreign transactions. Your card will not be charged S$10 when you buy an item that costs €10. Both Visa and MasterCard calculate the foreign exchange rates, and the FX fee is charged after the conversion is made. Sometimes, you may have the option to pay the expenditure in SGD through a system named 'Dynamic Currency Conversion,' but we advise that you avoid this process. More discussion on 'Dynamic Currency Conversion' is featured below. 

How to Spot Credit Card Foreign Transaction Fees

Most banks do not advertise foreign transaction fees upfront unless they charge lower fees than market level. For the most part, you'll need to look at the Pricing and Information or the Terms and Conditions documents for your credit card to find the related information. The FX fees are typically listed under the ‘Fees’ section, near the cash advance and balance transfer fees. 

When is an FX Fee Charged? Which Transactions are Foreign Transactions?

It is a bit tricky to explain what constitutes a foreign transaction. About a decade ago, a transaction was considered as a foreign transaction only if the transaction occurred on foreign soil. Now, however, a transaction is considered as a foreign transaction if it requires the involvement of a foreign bank in any part of the process. In other words, some purchases–such as online purchases–may be considered foreign transactions even if they're made from your own country. Even the transactions that are executed in SGD may be processed through a bank overseas. In such cases, it is nearly impossible to find out about the fees ahead of time since very few companies provide such information. 

For example, Chelsea is a credit card user from Singapore who was charged an FX fee even when it seemed like the charge wouldn't be applicable. She bought an airline ticket through an online booking website, and was very careful during the process and checked that the total price was presented in SGD at the end of her purchase. Later that month, when her credit card bill came, she noticed that she was charged an FX fee.

"When I called the company, I told them my situation," Chelsea said. "Thankfully, they refunded me the charge and that was it," she says, "but it has definitely made me suspicious of buying online now." Chelsea’s story elaborates why you should be careful about foreign transactions. Understanding how these fees are charged will help you spot the fees in your credit card bill and figure out how to avoid them in the future. 

Do FX Fees Count When Earning Credit Card Rewards? Are FX Fees Considered in Earning Credit Card Rewards?

Foreign transaction fees do not count toward rewards spending. Going back to the example we used earlier, you will only earn cashback only on the actual lunch expenditure of $100, not on the total S$102.8 bill you paid. The FX fee will be listed separately on your credit card bill. An FX fee is not eligible for any rewards like annual fees, late fees and interest fees. In fact, foreign exchange fees eat away your reward earnings and in some cases, can even leave you with a negative net total. 

Dynamic Currency Conversion: Charges in SGD vs Local Currency

Sometimes while shopping in a foreign country you get the option of paying with SGD instead of the local currency. This process is called Dynamic Currency Conversion (DCC). For various reasons, we advise against using this process. 

Firstly, when you use DCC, you are charged high exchange rates. In DCC, the merchant gets to set the currency exchange rate manually. They choose high rates to increase their profits. When you pay using the local currency instead, the transaction is handled by your credit card network and you receive the standard currency conversion rate. This way, you are not charged a biased exchange rate. 

Dynamic Currency Conversions are not free of FX fees. You might want to use DCC thinking you can avoid the foreign exchange fees this way. That is not always true. Some credit card companies will still charge you the fee while paying with SGD. Because the transaction can still pass through a foreign bank while using DCC and when that happens, it will be counted as a foreign exchange. Where can you find how your bank handles foreign exchange fees? If you check the Terms and Conditions section you can find the foreign transaction fee represented in SGD or local currency. 


If only local currency fees are listed in that section, it means your card issuer doesn’t charge for foreign transactions. DCC is a bad deal for you even if your credit card issuer doesn’t charge foreign exchange fees. The exchange rate in DCC might cost you higher than the 2.5% foreign exchange fee. 

Finally, remember that you have the right to turn down a DCC offer from your merchant.  Check your receipt before signing to make sure the total price is expressed in the local currency. If it is represented in SGD, inform your merchant to have it changed in the local currency. If the receipt shows the total price in both SGD and the local currency, let them know that you prefer to pay in the local currency. 


If you’re still confused about the whole process, just keep the following two points in mind. 

  • When traveling overseas, be sure to check how your credit card company is charging you. You can find this information online on their website in the ‘Terms and Conditions’ section.
  • Don’t use dynamic currency conversion. The merchants will choose a high conversion rate and despite using the DCC you may still have to pay an FX fee. 
Duckju Kang

Duckju (DJ) is the CEO of ValueChampion. He covers the financial services industry, consumer finance products, budgeting, and investing. He previously worked in the financial services industry, including at such hedge funds such as Tiger Asia and Cadian Capital. He graduated from Yale University with a Bachelor of Arts degree in Economics.

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