Do you often swipe your card to make a purchase abroad? Even online platforms allow you to buy products from an international store. However, have you checked the bank statement after an overseas purchase? All banks charge a fee when a transaction crosses a border. The hidden charge quietly inflates your bill and causes concerns.
Thus, before buying products or services outside Australia, you must check the foreign exchange rate. This blog provides a comprehensive detail of the international transaction rate.
What is a Foreign Transaction Fee?
Payment providers and banks charge a certain fee when you buy something in a foreign currency. It is also applicable for online transactions that are processed internationally. The fee comprises a part of your transaction amount. But, you may also need to pay the currency conversion and processing charges. In most cases, the foreign transaction rate is about 1%-3.5% of the purchase amount.
So, how would you calculate the exact transaction charge for your foreign deals? Suppose the value of your deal is AUD 10,000 in USD. With a 3% foreign transfer fee, you need to pay AUD 300.
Other flat fees for your overseas transactions depend on the payment provider.
Situations When You Need to Pay a Foreign Transaction Fee
Some people think that the international transaction rate is applicable only during a foreign trip. They apply for a travel credit card from ING, as an example, to obtain unique benefits.
Many travel credit cards are available with zero foreign transaction fees. But, you may need to pay the overseas transaction charge in other situations:
- Shopping from international online platforms
- Booking accommodations and flights through an overseas platform
- Subscribing to global services (outside Australia)
Why Do Most Banks Charge Foreign Transaction Fees?
These fees mainly cover different aspects:
- Network fee – for your payment networks that currency conversion
- Bank fee – An additional charge imposed by the card issuer
Although an individual charge is small, it stacks up over multiple transactions.
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Tips for Lowering International Transaction Charges
You can check for a few tricks for reducing the charge for foreign transactions.
Create a multi-currency account – It lets you receive and send funds in multiple currencies. There is no need to pay currency conversion fees, ensuring a low international transaction charge. For instance, you may keep EUR or USD in your multi-currency account. You do not need to convert them to AUD or the base currency.
Use a multi-currency card – This type of card seamlessly works with a multi-currency account. Use this card to transfer funds from your multi-currency account.
Compare payment providers – Check and compare international transaction charges before choosing payment providers. The rates for overseas fund transfers are not always the same.
All in All
Foreign transaction charges are the most important factor for transferring funds to a foreign recipient. Those who often engage in international shopping should be aware of this rate. Not every financial institution imposes the same charge for foreign transactions. You need to make smart payment choices to save money on every deal.
