For each foreign transaction, there is a foreign transaction fee (currently, 1% of the transaction for non-US dollar transactions), which may be included in the amount charged to your account. This charge may apply whether or not there is a currency conversion.
Fidelity customer service also repeated this as an official response in this Reddit post. Because I don’t use a debit card for purchases whether in the U.S. or in foreign countries (no rewards), the only way this foreign transaction fee could be relevant to me is on ATM withdrawals when we travel internationally.
The FAQ says that a foreign transaction fee “may be included.” It implies that the fee isn’t always included. When exactly is it included and not included?
A Real-World Test
I had a chance to see in real life whether a foreign transaction fee applied to an ATM withdrawal using the Fidelity debit card.
My wife took a trip to Canada last week. She withdrew $200 Canadian from an ATM at a gas station. Fidelity sent me this debit card activity alert in real-time:
A bank teller withdrawal on card ending in XXXX for $153.06 from CANCO #XXX XXXXXXXXX was posted to your account on 08/03.
$200 Canadian for $153.06 U.S. gave an exchange rate of 1 US dollar = 1.307 Canadian dollars. Google showed that the exchange rate on that day was 1 US dollar = 1.33 Canadian dollars. Using that exchange rate, we should be charged $200 Canadian / 1.33 = $150.38. Fidelity charged us $2.68 more than that. Did Fidelity include a foreign transaction fee in the amount charged to us?
Fidelity posted another entry to our account a day later:
ADJUST FEE CHARGED ATM FEE REBATE (Cash) +$2.26
Ah, the original $153.06 included an ATM fee charged by the machine. Fidelity reimbursed us that fee. The net charge after the ATM fee reimbursement was $153.06 – $2.26 = $150.80. This makes the exchange rate $200 Canadian / $150.80 U.S. = 1.326. That’s close to the 1.33 number from Google but it still doesn’t quite match it. Was the difference a foreign transaction fee that Fidelity included?
Card Network Exchange Rate
Fidelity’s debit card is a Visa debit card. Visa has an online Exchange Rate Calculator to show how the Visa network converted currencies each day. The calculator showed this when I put in the transaction date and a 0% bank fee:
$150.795295 USD rounds to $150.80. That’s exactly the net amount Fidelity charged us after the ATM fee reimbursement. There was NO foreign transaction fee from Fidelity on the ATM withdrawal.
Visa has a small markup in the exchange rate used on its network. Fidelity is only passing along the exchange rate from Visa. It’s the best exchange rate you can get as long you’re using a Visa card. A Schwab Visa debit card can’t do any better.
Some side notes on spending money in a foreign country:
Get Local Currency from ATM
The best way to get local currency is to use a local ATM machine. You pay no ATM fee and you get the best exchange rate when you have the right card. Don’t buy foreign currency in the U.S. before you leave. Don’t use the currency exchange booths at the airport. Just take your debit card and use an ATM machine when you’re there. You don’t need to bring US dollar bills to exchange them except as a backup in case you lose your debit card or you can’t find a working machine.
It doesn’t matter which ATM you use. An ATM at the airport works. One at a gas station also works, as you see in my wife’s ATM withdrawal. So does an ATM outside a bank branch.
If your bank charges an out-of-network ATM fee plus a foreign transaction fee and it doesn’t reimburse you the ATM fee charged by the machine, you’re with the wrong bank. Consider one of the 3 Ways to Use Fidelity as a Checking or Savings Account.
Contactless payment terminals (“tap-and-pay”) are widespread in many countries. Many cards are already contactless-enabled (look for a sideways wifi symbol on the card) but if yours still doesn’t have it, you can put it into Apple Pay or Google Pay and tap your phone to pay. You won’t have to take the card out of your wallet when you use Apple Pay or Google Pay. You won’t be asked to sign if you use contactless.
Act as a Local
Act as a local when you’re in a foreign country. If you see any mention of the U.S. dollar on any ATM machine or credit card terminal, back out and press a different button to transact in the local currency. They certainly don’t offer to charge locals in U.S. dollars and you shouldn’t pay any differently.
If you’d like to verify whether your bank included a foreign transaction fee on your international charges, use the Exchange Rate Calculator from Visa (or the Currency Converter Calculator from MasterCard if your card is a MasterCard). MasterCard may give better exchange rates on its network than Visa. If you do a lot of foreign transactions, get a MasterCard when all else is equal.
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