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Avoiding foreign transaction fees

As a traveling photographer, you may be charged two types of fees when using your credit cards in a foreign country—foreign transaction fees and dynamic currency conversion fees. These fees can eat into your travel budget. Here are strategies to avoid them.

Dynamic currency conversion

Dynamic Currency Conversion (DCC), sometimes known as Cardholder Preferred Currency (CPC), is when you make a charge in a foreign country and are given the option to pay either in the local currency or your home currency.

When making a payment, this option to pay in your home currency sounds convenient and is shown as an amount that is easy to understand compared to the foreign currency. However, that convenience comes at a stiff price. The merchant and their payment processor set the exchange rate significantly higher than your bank would charge for the conversion, and you could end up paying 5-10% more for the transaction than you have to. The merchant and payment processors profit from that extra margin.

The way to avoid DCC fees is simple. When paying with your card in a foreign country, always use the local currency, never your home currency. Your credit card company will convert currency for you at a more favorable rate.

Foreign transaction fees

Many credit cards have foreign transaction fees for charges made outside your home country. These fees are separate from the dynamic currency conversion mentioned above and are typically around 2.7–3.0%, though they may be higher for some cards.

If you travel often internationally and want to avoid foreign transaction fees, you will need to apply for a credit card with no foreign transaction fees. Most credit card companies offer travel-friendly cards without foreign fees. However, they also provide many cards that include these fees. You need to read the fine print for each card they offer to find the ones without these fees.

There may be annual fees for credit cards without foreign transaction fees, but if you spend a significant amount on your credit cards in foreign countries, the annual fee can quickly offset foreign transaction fees.

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