Why Did I Get Charged an International Fee for an At-Home Purchase?

Foreign transaction fees are charged on debit and credit card transactions made out of the country, even if purchased from the comfort of your own home.

Gone are the days when traveling abroad and using your credit card was the only way to incur foreign transaction fees added to your purchases. In the modern world of global access to shopping on the internet, savvy consumers should be aware their credit cards might be charged an international fee if they buy from a foreign merchant online.

What Is an International Transaction Fee?

A foreign transaction fee, or international fee, is a surcharge on a credit card purchase processed by a foreign bank, or in a currency other than the U.S. dollar. Traditionally, that meant consumers would pay them when making purchases while traveling. In the modern era, it also means they can be charged when customers buy things online from an overseas seller, according to TransferWise, an online money transfer service specializing in international currency exchange.

The fee is composed of two parts – the first charged by the credit card network, such as Visa or MasterCard, and the other by the issuer, such as Citibank, the consumer finance information website ValuePenguin explains. Visa or MasterCard charge a 1% fee. Citibank and others in the credit card business charge varying fees for various cards, and in some cases no fee at all.

Why Do Banks Charge Foreign Transaction Fees for Online Purchases From Home?

Banks and other credit card issuers charge a foreign transaction or international fee to compensate them for having to process transactions that require them to convert currency, according to CreditCards.com, an online resource of credit card information and reviews. Just as when an American wants to make a cash purchase in Spain, for example, he or she has to convert dollars to euros, credit card purchases from American accounts must be converted to foreign currency to complete a foreign transaction.

Historically, to be considered foreign a transaction had to happen on foreign soil. Things have changed though. In recent years, credit card networks and issuers have started considering transactions to be foreign “if, at any point, they pass through a foreign bank,” ValuePenguin says.

Nowadays, an online purchase made by someone in America, from the comfort of their living room, can be classified as a foreign transaction – and can trigger an international fee – if their payment passes through or is made to a foreign country.

“And very few places will actually provide that information, making it near impossible for consumers to find out ahead of time,” ValuePenguin says.

How Can You Avoid an International Fee?

To find out if a credit card carries a foreign transaction fee, cardholders can look at the terms and conditions of the card. By law, all fees must be disclosed.

Charging foreign transaction fees on online purchases is not illegal, but some banks might be violating their own contracts if they do so.

When traveling, the easiest ways to avoid paying an international fee on a purchase is to either pay cash, or use a credit card that doesn’t charge the fee. When it comes to making online purchases, buyers can avoid the fee by avoiding merchants located outside the U.S.

Online retailers like Amazon might cause some confusion. Though Amazon is an American company, it often serves as a conduit between foreign merchants and buyers. That means buying an item from a seller in China, for example, might result in an international fee even if the purchase is facilitated by Amazon, the online consumer information site WalletHub says.

Consumers who find out they’ve been wrongly charged foreign transaction fees can request they be refunded by their credit card company, but if the company refuses, the customer might have grounds for legal action.

A California man filed a class action lawsuit against Citibank in 2019 after he discovered he was charged a 3% international fee when he purchased items online from a merchant in Canada. The products were listed in dollars on the website and so was his total price and invoice, he said.

The lawsuit argues Citibank’s own account information sheets say customers “will not be charged a fee unless they are using the Citibank Banking Card outside of the U.S.,” and the company did not inform its customers that a fee could be charged if they were to engage in an online transaction from the U.S. with a foreign merchant.

Fighting an International Fee

According to Wallethub, foreign transaction fees are issued at the discretion of the bank. While international fees can be avoided, as online shopping becomes ever more popular, consumers may find themselves facing this 2% to 4% fee at some point.

Money Talks News says that there are ways to fight international fees. Keeping in mind that these fees are issued at the bank’s discretion, Money Talks recommends acting as soon as possible to contact the credit card company – as soon as the fee posts to the account. One tip is to try calling customer service early in the day to get a representative that is fresh and ready to help.

Despite the fact that an international fee assessed on a purchase made at home feels unfair, Money Talks stresses the importance of being polite while talking to the credit card company. If the first polite call does not work, keep calling back, says Money Talks, or ask to speak to a supervisor. In addition, Money Talks says that consumers should be prepared to explain what happened, like misunderstanding that the online purchase was with a foreign company, and be willing to point out their good track record with the credit card company.

Keep in mind that there are a number of credit cards that do not charge foreign transaction fees, and more are being offered to consumers every day. If international fees continue to pop up on a credit card statement, it may be time to consider a new company, rather than spending the time to keep dealing with the problem.

Is There a Credit Card with No International Fee?

According to a report by CreditCards.com, there are several credit cards out there that do not charge an international fee. Among them are Chase’s Sapphire Preferred and Sapphire Reserve cards, Wells Fargo’s Propel American Express card, Discover it Cash Back card, the Platinum Card from American Express, Capital One’s Quicksilver and Savor One cash rewards cards, Capital One’s VentureOne and Venture rewards cards and Bank of America’s Travel Rewards card.

Join a Free Foreign Transaction Fees Class Action Lawsuit Investigation

If you were charged a foreign transaction fee on a debit card or credit card purchase made on a foreign website, you may qualify to join this foreign transaction fees class action lawsuit investigation.

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This article is not legal advice. It is presented
for informational purposes only.