Best Credit Cards For Overseas Spending in Singapore 2024

Foreign transaction fees are charges imposed by credit card issuers when you make purchases in a currency other than the one in which your card is denominated. You need to be aware of these fees to manage your expenses effectively abroad. Below is a breakdown to help you understand foreign transaction fees:

Definition of Foreign Transaction Fee

Foreign transaction fees, often ranging from 2.5% to 3.5% of the transaction amount, are incurred when you make purchases or withdraw cash in a foreign currency.

How Does Foreign Transaction Fee Work?

When you use your credit card overseas, the transaction amount is converted into your card's native currency. The foreign transaction fee is then applied as a percentage of the converted amount.

How Does Credit Card Networks Affect Transaction Fees?

It's important to check your card's terms since different credit card networks may have varying fee structures. For instance, Visa and Mastercard both charge a fee of 1%. The credit card company will then add a 1-2% issuer fee. This produces up to 3% foreign transaction fee.

Dynamic Currency Conversion (DCC)

Some merchants may offer DCC, allowing you to pay in your home currency instead of the local currency. While this might seem convenient, it often involves less favorable exchange rates (proposed by the merchants themselves) and additional fees.

What is Dynamic Currency Coversion (DCC)?

Dynamic Currency Conversion (DCC) is a service offered by certain merchants and ATMs, allowing customers to choose whether to pay for a transaction in their home currency rather than the local currency.

Why you should avoid DCC?

Avoiding Dynamic Currency Conversion (DCC) is advisable for several reasons.

When you opt for DCC, merchants or ATMs convert your transaction amount into your home currency using their own exchange rates, which are often less favourable than the rates provided by your credit card issuer. This can result in higher costs for each transaction due to increased fees and less advantageous exchange rates.
Choosing to be billed in the local currency allows you to take advantage of better rates offered by your credit card issuer, potentially saving you money on international spending.
By avoiding DCC, you reduce the risk of hidden fees and ensure greater transparency in your financial transactions while travelling abroad.

Good Credit Card Spending Habits When Overseas

Having smart credit card habits abroad is key to financial efficiency and worry-free spending while travelling.

Monitor Exchange Rates

Stay informed about currency exchange rates to understand the cost of your transactions. Consider using apps or financial websites for real-time rate updates.

Choose Local Currency

We couldn't stress this enough, but when making purchases, always choose to be billed in the local currency to avoid less favourable exchange rates associated with Dynamic Currency Conversion (DCC).

Avoid Cash Advances

Try to minimize or avoid cash advances from ATMs, as they often come with higher fees and interest rates compared to regular credit card transactions.