How is international transaction fee calculated?

Calculating International Transaction Fees

International transaction fees (ITFs) are charges applied by credit card issuers when a card is used for purchases made outside of the issuer’s home country. These fees vary depending on the card and provider.

How ITFs Are Determined

ITFs are typically calculated as a percentage of the purchase amount. Most issuers charge between 1% and 3%, but some may apply a fixed fee instead. The specific fee charged is determined by the issuer, so it’s recommended to check the terms and conditions of your card before making international transactions.

Additional Factors

In addition to the base percentage or fixed fee, the final cost of an ITF can also be influenced by:

• Currency Conversion Fees: When a purchase is made in a currency other than the one associated with your card, your issuer may also charge a currency conversion fee.
• Network Fees: Some credit card networks, such as Visa and Mastercard, charge their own fees for international transactions. These fees are passed on to card issuers and may be included in the ITF.

Example Calculation

Suppose you make a purchase of $100 using a credit card with an ITF of 2%. The calculation of the ITF would be:

ITF = Purchase Amount x ITF Rate
ITF = $100 x 0.02
ITF = $2

In this example, the ITF would be $2.

Minimizing ITFs

To minimize ITFs, consider the following strategies:

• Using a card with a low or no ITF: Some cards offer lower ITF rates or even waive them altogether for international transactions.
• Using cash or a travel credit card: Cash is typically not subject to ITFs, and travel credit cards often offer favorable exchange rates and waive ITFs for international purchases.
• Selecting the right currency: When making a purchase in a foreign currency, choose to pay in the local currency rather than your home currency to avoid double conversion fees.