Foreign transaction fee: Meaning and when it applies to you
Last updated: 20 Nov 2025
Key takeaways
- Foreign transaction fees are charges for currency conversion or international processing
- Fees apply when payments are made or received in foreign currencies, including online or in-person purchases
- Multi-currency accounts reduce fees by holding, sending and receiving funds in multiple currencies without conversion
- Compare payment providers to find lower transaction fees or zero-fee options to save on international transfers.
- Strategic payment timing and tools like forward contracts help lock in favorable rates and cut foreign transaction costs.
Every dollar saved is a dollar earned—especially for businesses operating on an international scale. For companies that make frequent cross-border payments, hidden costs like foreign transaction fees and high currency conversion rates can quietly eat into profits, turning what should be routine transactions into significant expenses.
This is why you need to calculate and account for these fees. But before you do that, you must understand how these work and what strategies can be used to reduce foreign transaction fees. This article talks all about foreign transaction fees and strategies to save on it.
Table of Contents
What is foreign transaction fee?
A foreign transaction fee is a charge applied by banks or payment providers when a transaction involves a foreign currency or is processed internationally. This fee is also known as an international transaction fee or a foreign currency transaction fee. It is typically incurred when making payments in currencies different from your account’s home currency.
The fee usually consists of a percentage of the transaction amount or a fixed amount set by the payment provider. There can also be other processing charges or currency conversion fees.
How do foreign transaction fees work?
Foreign transaction fees are applied whenever you make payments in a foreign currency or when transactions are routed through an international banking network, resulting in additional costs for cross-border financial activities. These fees compensate banks and payment providers for the costs associated with currency conversion and cross-border transaction processing.
- Why it’s charged:
Banks and payment providers incur costs when converting one currency to another or processing payments through international networks. The fee is passed on to you to cover these expenses. - How it’s calculated:
Most foreign transaction fees are a percentage of the transaction value or a flat fee. For instance:- A transaction worth AUD 10,000 in USD with a 3% foreign transfer fee would incur AUD 300 in charges.
- Additional flat fees may apply to international transactions, depending on the payment provider
Note: You may also incur a markup on the exchange rate, which varies depending on the payment provider. Many banks and payment platforms offer currency calculators on their websites to help you estimate transaction costs before completing a payment.
When do you pay a foreign transaction fee?
You pay a foreign transaction fee whenever a payment or purchase is made in a currency different from your account’s base currency. For example, making a payment in USD or NZD from an AUD bank account will incur a fee.
This applies to direct bank transfers, online payments and credit/debit card transactions, whether in person or online.
Some payment providers will also charge foreign transaction fees when you receive payments in a foreign currency. In this case, the foreign transaction fee will be deducted from the total funds you receive.
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Are there any ways to reduce foreign transaction fees?
Yes, there are several ways to reduce or even eliminate foreign transaction fees, making international payments more cost-effective for businesses. Here’s how you can minimise fees on international transactions and avoid unnecessary costs:
1. Use a multi-currency account
A multi-currency account allows you to hold, send and receive multiple currencies without converting them back to your base currency. That means you can avoid frequent currency conversion fees and reduce the international transaction fee on the bank account.
For example, if you frequently transact in USD or EUR, holding those currencies in your account eliminates the need for constant conversions. For example, if you collect funds in USD, you can keep them in your multi-currency account instead of converting them to AUD or NZD (your base currency). You can then use these USD funds to pay directly for SaaS tools or US-based suppliers.
2. Use a multi-currency card for online payments
A multi-currency card works seamlessly with a multi-currency account. You can use the existing funds in your multi-currency account to make payments through the multi-currency cards without incurring additional international transaction fees or exchange rate markups—provided you already hold sufficient funds in the currency of the payment.
3. Compare payment providers and check fees
Before committing to a payment provider, always check the foreign transaction fees they charge. Payment providers often have different rates for international transfers; even a small percentage difference can save your business significantly over time. Look for providers that offer competitive rates for international transactions.
4. Plan International transactions strategically
Timing payments to align with favourable exchange rates can reduce costs significantly. For example, a 1% improvement on a $50,000 payment saves $500. Opt for providers offering tools like forward contracts to lock in rates or firm orders to execute payments at target rates, ensuring cost-effective international transactions.
Check whether your bank or payment provider uses mid-market rates or includes a markup in their exchange rates. A 2% markup on large transfers can add hundreds to your costs. Consolidating payments into fewer transactions can also help reduce multiple international transfer fees.
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Disclaimer: The information contained is general only and largely our views. Before acting on the information you should consider whether it is appropriate for you, in light of your objectives, financial situation or needs. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions, estimates, mentioned products/services and referenced material constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. WorldFirst shall not be responsible for any losses or damages arising from your reliance of such information.
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