International travel was once only for the rich and people who lived near Canada. Credit card holders and even airline passengers were also members of an exclusive club many years ago. It was these wealthy individuals who seemed not to mind being charged an extra 2 or 3% when using their credit cards in other countries.
We live in a different world now where people cross borders regularly and seemingly everyone has a few credit cards in their wallet. At the same time, the highly competitive market for reward credit cards has made everyone focus on the one or two percent we might be getting back on our purchases. In that context, at 2 or 3 percent Foreign Transaction Fee (FTF) is a sucker punch to any traveler who utilizes reward cards. Presumably, the FTF covers the cost of the bank performing a simple calculation to convert one currency to another. Since the invention of the computer, such calculations cost nothing. FTFs are scam, a charge sneaked in to your statement on the hope that you won’t notice it after you return from your vacation and won’t remember by the time you leave the country again.
For the longest time, savvy card holders and regular travelers flocked to Capital One’s products, as they were the only major issuer with no FTF. Others found a few credit unions that offered FTF free cards. Two years ago, American Express inexplicably raised their FTF from 2% to 2.7% and more card holders became conscious of this rip off.
Only recently has there been a trickle of new cards that omit the FTF in the hopes of gaining a loyal following from international travelers. For example, Chase bank dropped the FTF on their British Airways affiliated card. Clearly, this card is marketed towards individuals who travel internationally. Chase also dropped the FTF on two of their cards that are affiliated with hotel chains, the Priority Club card and the Hyatt credit card.
Citi Bank later announced they would end FTFs on their Thank You Premier and Thank You Prestige cards. Amex then dropped the fees on their otherwise expensive American Express Platinum and Centurion cards (better known as the American Express Centurion Black Card). This still leaves Capital One as the only bank with no FTFs on any of their cards across the board.
Another option is the Pentagon Federal Credit Union (PenFed). They do not have FTFs on any of their cards.
What Should You Do
If you travel out of the country regularly, even if infrequently, you should have one of these FTF cards in your wallet. As a matter of principal, I refuse to pay these fees as they are a pure money grab. I work hard to find the best reward cards with the most attractive rates of return. There is no way that I will be paying more in fees that I get in rewards.