Between forex markups, foreign currency transaction fees, currency conversion fees and DCC, trying to find out how much you’re paying in credit card overseas charges is a mind-boggling affair. Achieve clarity with this concise guide. 

Credit cards continue to be one of the most popular ways to pay when in another country, due to a combination of attractive rewards, safety and convenience. But what’s not so great about using your credit card in a foreign currency are the various fees and charges involved. 

While foreign transaction fees alone aren’t likely to blow up your bank account, they can still add up to a pretty sum. Read this guide to understand how much more you are really paying when tapping your credit card while on holiday. 

Table of contents:

• An overview of credit card overseas charges
• Foreign transaction fees you need to know
• How to avoid or minimise credit card overseas charges
• Frequently Asked Questions (FAQs)

An overview of credit card overseas charges 

When you pay with your credit card overseas, a lot happens behind the scenes. Let’s say you pay for a restaurant meal in Japan, which would be charged in Japanese Yen. 

The JPY amount charged to your credit card is first converted to USD, then converted to SGD; this is the final amount that gets charged to your credit card balance. 

Each time currencies are converted, a spread is involved. This could be a government-mandated rate, or wholesale interbank exchange rates. For processing your transaction, both the card association (Visa, Mastercard, American Express, etc.) and the bank charge a fee. 

There are also other instances where you might encounter overseas charges. One scenario is when you opt to pay in SGD while overseas through a service known as Dynamic Currency Conversion – which is not a free service.

Another scenario is when you find yourself urgently needing cash halfway through your holiday, prompting you to take a cash advance fee. Once again, doing this will incur credit card overseas fees. 

And that’s not the end of the story. There are many other credit card overseas charges and foreign transaction fees that you may encounter.

Back to top

Foreign transaction fees you need to know

As you can see, there are several fees and charges that you can incur on foreign currency transactions. We’ll discuss each one in the following sections. 

Credit card foreign exchange rate

As mentioned earlier, foreign currency transactions are first converted to USD then to SGD. These conversions are carried out at forex rates determined by the respective card associations, which are not disclosed to the cardholder. 

Also, the forex rate used will depend on the day the conversion is processed, which may not be on the same day as when you made the purchase. A markup may be included on top of the mid-market exchange rate. 

Foreign currency transaction fee

Both your bank and the card association charge a fee for processing foreign currency transactions. This is on top of the credit card foreign exchange markup.

Typically, card associations charge 1% of the value of the transaction. Meanwhile banks charge up to 2.5% – this means foreign currency transaction fees can range from 2.25% to 2.5%. In many cases, this is the largest fee associated with overseas transactions. 

Currency conversion fee on SGD transactions processed overseas

If your credit card transaction is charged in SGD but processed overseas, you will not incur the foreign currency transaction fee. Instead, you will be charged a currency conversion fee. 

This fee varies widely, from 1% to 2.8%, depending on your bank. Currency conversion fees apply even on online transactions, so before you click that Check Out button, you may want to check where the e-commerce store or platform is based. 

Dynamic Currency Conversion (DCC) fee 

When you’re shopping overseas (or online), you may be offered the option to pay in SGD instead of the local currency such as JPY or TWD or THB. 

This is a service known as DCC, and is touted as a convenient service for travellers who want to know exactly how much they are spending. However, DCC should always be avoided because it is notorious for charging a high markup. 

The forex rate used is determined and paid to the DCC providers, which are not your card associations. This means that in addition to DCC, you will be charged the currency conversion fee (see above) – an extra 1% to 2.8%.

Cash advance fee

A cash advance allows you to withdraw part of your credit limit in cash from a compatible ATM. This can be a lifesaver in a pinch, such as when you find yourself in need of cash while overseas. 

The catch is cash advance fees are costly, typically at 8% of the amount withdrawn, or S$15, whichever is higher. Also, the cash withdrawn must be repaid to your credit card account in the upcoming statement, with any shortfall subject to credit card interest charges. 

Back to top

How to avoid or minimise credit card overseas charges

Say no to DCC

The most significant way you can minimise credit card overseas charges is to say no to DCC, every single time. You can do so simply by choosing to pay in the local currency, and never in SGD. 

Doing this will allow you to avoid unfavourable forex rates charged by the DCC operators, and the additional currency conversion fee of 1% to 2.8%. 

Try not use a cash advance overseas

Cash advances come with costly fees, and are best reserved for emergencies. Better yet, should bring a debit card or ATM card along on your trip, and use it to withdraw cash when necessary. 

The overseas ATM usage fee will be much lower than your cash advance fee. And since you are drawing from your bank account, you won’t have to deal with any credit card interest charges. 

Use cards that do not charge foreign currency transaction fees

If you’re really determined not to pay any foreign currency transaction fees or credit card overseas charges, one solution is to use cards that do not have such charges.

For instance, the Trust Card does not charge foreign currency transaction fees, and only the prevailing Visa rate is applied on your transaction. The drawback is you won’t earn any rewards points or air miles which come with other popular travel cards. 

Another way to minimise your foreign transaction fees is to pair your credit card with the Instarem Amaze card. Only Mastercard credit cards are accepted, but you’ll be able to enjoy a lower fee when making overseas purchases. 

Choose credit cards with high rewards for overseas transactions

Travel credit cards offer more miles per dollar for overseas transactions, with no minimum spend or monthly caps. Such cards can help you offset the cost of overseas charges by “clawing back” some value in the form of higher air miles. 

Bear in mind that the more you use your credit card overseas, the more foreign transaction fees you will rack up. Hence, this method may work best with limited credit card use. 

Back to top

Frequently Asked Questions (FAQs)

Yes. Any credit card transactions made in a foreign currency will be subject to fees. These include the foreign currency transaction fee and currency conversion fee. If you opted for DCC, you will also be charged a fee. 

Extensive use of a credit card while overseas will incur fees that can add up over time. This can be partially offset by choosing a credit card that has high rewards for overseas transactions. One example is air miles credit cards, which provide a higher miles earn rate on overseas transactions.  

You can avoid international transaction fees with a credit card that doesn’t charge foreign transaction fees. Otherwise, you can minimise your international transaction fees by refusing DCC and instead pay in the local currency, or by limiting the use of your credit card while overseas. 

Read these next:

Best Credit Cards For Overseas Spending in Singapore

Cash Vs Credit Card Vs Multicurrency Card For Travelling Overseas

10 Overseas Accommodation Safety Tips For Solo Travellers To Follow

Best 6 Credit Cards For Overseas Spending

Which Credit Card is the Best for Overseas Dining?

How To Activate Your Credit Card For Overseas Use