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‘No foreign transaction fee’ card test: are you ripped off by the exchange rate?

by on Mon August 20, 2012 • 6 Comments

Foreign transaction receiptSome readers have questioned whether the ‘no foreign transaction fee’ feature of Chase cards like the Sapphire Preferred® Card and Hyatt Visa really saves you money. The theory is that Chase charges a jacked up exchange rate to make up for no longer charging you a 3% fee on each foreign purchase.

Well, we tried it in action in the UK during the Olympics…with a small transaction on each of the Chase Sapphire Preferred® Card (no fee), United Mileage Plus Explorer (charges a fee), and Platinum Card from American Express (no fee) all on the same weekend, when exchange rates don’t fluctuate.

And the result…Chase isn’t charging a less favorable exchange rate to holders of ‘no transaction fee’ cards versus its cards that do carry the fee. However the fee Chase charges overall is oh so slightly less favorable than the one American Express charges, but that’s probably more a function of the Visa network versus the American Express network.

The difference is 0.003 points, which is negligible. In both cases the exchange rate was nearly identical to the prevailing open market rate used by banks to exchange money amongst each other, which is about as good as you can get.

Chase Sapphire Preferred® Card

  • Purchase: 12.65 Pounds
  • Statement billed: 19.84 Dollars
  • Fee billed: $0
  • Exchange rate: 1.568

United Mileage Plus Explorer

  • Purchase: 35.00 Pounds
  • Statement billed: $54.90 Dollars
  • Fee billed: $1.64 Dollars
  • Exchange rate: 1.568

Platinum Card from American Express

  • Purchase: $0.85 Pounds
  • Statement billed: $1.33 Dollars
  • Fee billed: $0
  • Exchange rate: 1.565

Our verdict – use credit cards that advertise no foreign transaction fees with confidence. You are saving on the fee, and the exchange rate is still very competitive. You’re also earning rewards that can amount to the equivalent of 1%, 2%, or much more in cash value for travel.

Click here for a list of credit cards that offer no foreign transaction fee.

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Chase Sapphire Preferred® Card

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6 thoughts on ‘No foreign transaction fee’ card test: are you ripped off by the exchange rate?

  1. AL

    I got ripped off at chase bank foreign exchange cost me 10% of amt . They say no fees but never said they will give us they make up their own ridiculous rate amounting to 10% of amount exchanged. I couldn’t cancel transaction and to swap back money to us currency they gave me another Ridiculous rate which would cost me another $100 per $1000 exchanged. I was out $200 out of $1000. Never use Chase bank for foreign exchange!!!

  2. Jenny

    I know it’s almost been a year since you posted this article, but I currently encounter a question regarding your topic, and I wonder if you would know anything about it.

    I have an AMEX Fidelity card, and it actually doesn’t charge any foreign transaction fee; however, when I call the representative to confirm, I was told that even though there’s no foreign transaction fee, the exchange rate will include a commission of 1%.

    I wonder if all other cards stating “no foreign transaction fee” also impose such “commission”? Thanks!

    1. MileCards

      @Jenny – No, it doesn’t look like the cards we tested had that kind of commission. The rates were pretty close to the spot rates the banks charge each other.

  3. Steve Westhead

    Great article! I’ve always figured they were getting their pound of flesh somehow but it looks like we’re getting a pretty good deal! Thanks!

  4. David

    Awesome post.

    Did you ever do anyhing similar with ATM withdrawals? I have the following options: Citibank, HSBC, and Fidelity Cash Management. I think Citi is awful, but have no data.

    Should I do Charles Schwab instead?

    1. MileCards

      @David – Harder to do an exact test since it’s rare to have several checking accounts. But from what we’ve read most charge tbe basic (good) interbank rate for the exchange rate itself, plus whatever fee the bank chooses to tack on. Charles Schwab claims to be no fee so it should be the interbank rate, or interbank rate plus 1%. Either way, better than going to a currency exchange booth.


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