6

I purchased plane tickets at Kuwait Airways website, for a trip originated from US with a transition/overlay at Kuwait, by using Fidelity Rewards Credit Card, a credit card issued in US. My credit card account shows not just the transaction, but also a second one with 1% of the ticket price, labeled as FRGN TRANS FEE and charged by Kuwait Airways if I am not mistaken.

DESCRIPTION: Frgn Trans Fee-Kuwait Ai2292113807162 Ci

TYPE: FRGN TRANS FEE

Merchant details
CATEGORY: KUWAIT AIRWAYS
METHOD: Manually Entered

I remember seeing the price in US dollars and not seeing any currency conversion or foreign transaction fee, when placing the order directly at the airline website. My credit card company replied to me:

As disclosed in your Cardmember Agreement, if you use your card for retail purchases at foreign merchants or for cash withdrawals from foreign ATMs, your foreign currency transaction will be converted to U.S. dollars, and you will be assessed a foreign transaction fee. The fee is 1% of each U.S. dollar amount. This fee applies when the merchant is located in a country other than the United States, even on transactions submitted to us in U.S. dollars.

The merchant's business name listed with Visa is Kuwait Airlines.

When using a credit card to make a purchase of a service of a merchant located in a country different from US where the credit card company is located,

  • Does it matter to the following questions whether the merchant lists their service in US dollars or a different currency on their website?
  • is there always currency conversion?
  • is a foreign transaction fee inevitable, regardless of its percentage of the service price (and regardless of whether the credit card company or the merchant want to charge any at all i.e. whether the percentage is 0%)?
  • who charges for the foreign transaction fee, the merchant, or the credit card company?
  • Is it possible to know about the amount of foreign transaction fee when placing an order with a merchant outside the country of the credit card company?
  • Is it possible to avoid foreign transaction fee using a different payment method from credit card? For example, debit card, Paypal?

Thanks.

17
  • 8
    No. Some cards explicitly have zero foreign transaction fee. You just have to find one and sign up for it IF you make enough foreign transactions to make it worth the hassle. For example, I got a Bank of America card for my kids to use when they went to Europe . But I just made a foreign purchase on my regular card because it was convenient. The ForEx fee is the cost of that convenience.
    – RonJohn
    Feb 13 at 23:04
  • 2
    As for the amount… you posted the card member agreement; it said 1%.vAnd as for who charges it: the bank, of course, since they’re the ones doing the work and taking the risk.
    – RonJohn
    Feb 13 at 23:07
  • 3
    Lots and lots of effort goes on behind the scenes to make your life easy.
    – RonJohn
    Feb 13 at 23:09
  • 1
  • 1
    Ask the airline. They may have converted the price as a convenience for you. But they can't tell you how much your bank is going to charge for currency conversion fees, so unless they have a US affiliate, have you pay there, and eat the conversion costs themselves the best they can do is give you the equivalent without that cost. Given all the other hidden fees that often find their way into airfare, I don't think this should be considered overly surprising.
    – keshlam
    Feb 14 at 1:24

2 Answers 2

8

who charges for the foreign transaction fee, the merchant, or the credit card company?

Foreign transaction fees are charged by your credit card issuer, not by the merchant. Not every credit card has foreign transaction fees, credit cards specifically geared towards travelers (e.g.: many airline branded, especially high-tier, or high-tier brands like Sapphire from Chase or Premier from Citi, or even the Costco card) do not charge foreign transaction fees.

Worth mentioning that the "foreign" in the "foreign transaction fee" relates to the merchant, not the currency.

Is it possible to know about the amount of foreign transaction fee when placing an order with a merchant outside the country of the credit card company?

Absolutely. It should be detailed in your credit card terms and conditions. In the US it must be explicitly stated in the term sheet before you sign up for the card.

is there always currency conversion?

Merchants operating in a different country operate in the currency of that country. So if you transact with such a merchant there's bound to be a conversion somewhere.

Currency conversion is a separate issue, and different banks and merchants have different rates. Usually doing conversion through your credit card would yield best results (especially higher-tier/traveler brands), but check and confirm. Different cards would have different rates, some better for one currency, others may be better for another. Shop around. From my experience, allowing the merchant to do the conversion would yield the absolute worst (by far) rate for you since it gives the merchant an opportunity to make more money off of you. Merchants listing prices in foreign currency would usually assume their own conversion rate.

Is it possible to avoid foreign transaction fee using a different payment method from credit card? For example, debit card, Paypal?

Shop around for credit cards without foreign transaction fees, there are a lot. Specifics depend on your country, I mentioned some US-centric examples above.

9
  • 1
    Thanks. (1) "Merchants operating in a different country operate in the currency of that country. So if you transact with such a merchant there's bound to be a conversion somewhere." The ticket price was listed in US dollars on the airline website, and therefore no ambiguity of currency conversion rate is involved. (2) Does whether the merchant lists their service in US dollars or a different currency on their website matter to the applicability/ existence of foreign transaction fee?
    – Tim
    Feb 14 at 0:47
  • 1
    @Tim (1) it's up to the merchant to decide in what currency/currencies to charge. (2) no. The "foreign" in the "foreign transaction fee" relates to the merchant, not the currency.
    – littleadv
    Feb 14 at 0:54
  • Thanks. (1) I am asking about foreign transaction fee, not currency conversion rate. The airline already provided the price in US dollars, and I found them by comparing on Expedia, so I assumed the tickets were sold in US dollars, and never thought about how the airline determined the price in US dollars.
    – Tim
    Feb 14 at 1:14
  • @Tim again, the foreign in foreign transaction relates to the merchant, not the currency. The conversion costs are already reflected in the USD price you got. The merchant charged you in USD, but their home country uses a different currency, so their operational currency is different. They did the USD->whatever conversion for you themselves and charged you for that, as part of the USD price you paid. But for the foreign transaction fee it doesn't matter - the merchant is foreign.
    – littleadv
    Feb 14 at 1:31
  • Note that just about every detail of this topic depends on where you're based, and potentially on the details of your card agreement. It may be that U.S. card issuers universally charge for foreign merchant transactions regardless of currency, but that can be different elsewhere. For example, in Israel, the fee is assessed for the currency conversion specifically, so there's never any additional charge in the case of a foreign merchant that posts a charge in ILS.
    – Micha
    Feb 14 at 9:49
2

The listed currency only sometimes matters. If you pay in your local currency, either the merchant will charge you from a local (to you) subsidiary - in which case there’s no foreign transaction fee - or from their normal account but in your currency, in which case you’ll pay the fee and get the merchant’s usually-poor exchange rate.

There is always a currency conversion when paying in a foreign currency; that’s tautological. Not all banks charge such a fee, but most do, and those charges will be listed in your account agreement. To the extent that the merchant charges any fees, those will be included in the total you directly pay, not added on later.

Revolut is a common service used by people trying to avoid foreign transaction fees (and poor exchange rates). There are others as well. Paypal will not help you avoid this fee, and debit card foreign transaction fees are often higher than credit card fees.

5
  • thanks. (1) "There is always a currency conversion when paying in a foreign currency". Does my case sound like that I pay the plane tickets in a foreign currency, when the airline lists the prices in US dollars on their website?
    – Tim
    Feb 13 at 23:08
  • (2) " If you pay in your local currency, either the merchant will charge you from a local (to you) subsidiary - in which case there’s no foreign transaction fee - or from their normal account but in your currency, in which case you’ll pay the fee and get the merchant’s usually-poor exchange rate." What does "a local subsidiary" mean? Kuwait Airways has an office in NYC, and does that count as a subsidiary local to US? What does "their normal account" mean?
    – Tim
    Feb 13 at 23:10
  • 1
    @Tim Again, the currency doesn't matter; the location of the merchant account (the bank account to which credit card payments are eventually deposited) matters. And Kuwait Airways having an office in NYC isn't strong evidence of where their merchant account is. This is not information that is readily available, I'm afraid.
    – Sneftel
    Feb 14 at 10:58
  • Comments have been moved to chat; please do not continue the discussion here. Before posting a comment below this one, please review the purposes of comments. Comments that do not request clarification or suggest improvements usually belong as an answer, on Personal Finance & Money Meta, or in Personal Finance & Money Chat. Comments continuing discussion may be removed. Feb 16 at 8:38

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .