How Do Foreign Service Fees Affect Use-Abroad Credit Cards?

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Any Visa credit card or MasterCard can be considered a use-abroad credit card as they are accepted at millions of locations worldwide, but don’t make the mistake of thinking that this global facility means you won’t pay extra for using your credit card abroad.

There are four main points to consider when looking at how foreign service fees affect use-abroad credit cards:

1. the foreign currency conversion fee;
2. the overseas transaction charge;
3. dynamic currency conversion; and
4. the cash transaction fee.

The foreign currency conversion fee:

This is the fee charged by your credit card provider for converting any foreign currency purchases back into Australian dollars. This is around 2% to 3% of the purchase amount. This a fee most people know about when using their credit card abroad, and it is accepted as the price you must pay for the convenience of using your plastic in a country other than the one it was issued in.

The overseas transaction charge:

This is the fee charged by your credit card provider for simply making the transaction. The vast majority of Australian credit card providers waive this fee.

Dynamic Currency Conversion (DCC:)

This can easily be confused with the foreign currency conversion fee, but they are different in terms of who charges them and what rates are applied. The Dynamic Currency Conversion fee is charged by foreign retailers and banks to unsuspecting travellers who are not fully conversant with how foreign service fees affect use-abroad credit cards.

The way it works is that the foreign retailer or bank does not ask the customer in which currency they would like to be charged for their purchase or cash withdrawal, and instead charges them in their own home currency. When they do this, they can charge 4% or upwards on top of the purchase price. This would then obviously void the credit card company’s foreign currency conversion fee. By law, the customer is allowed to choose which currency they are charged in, but if you don’t know about DCC, you can suffer its higher rates unbeknown.

The cash transaction fee:

Although credit cards are not usually considered a sensible way of making cash transactions – debit cards being the obvious choice – many customers may view this fee as an acceptable price to pay for the safety and convenience of not having to carry around with them large amounts of cash when travelling.

Remember to take all these charges into consideration when calculating how foreign service fees affect use-abroad credit cards.

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