Cross-border transfers are a must if you’re operating a global business. However, hidden fees and charges can quickly turn a seemingly good deal into a financial headache. Two fees that often perplex you would be foreign transaction fees and foreign currency conversion charges. In this blog post, we'll dive into the differences between these two fees, how they impact your finances, and provide some tips to minimise their impact. So, let's unravel the mystery and make your international spending more cost-effective!

Understanding Foreign Transaction Fees

You may encounter a foreign transaction fee whenever you are making a cross-border transfer for your business outside of your country. This fee, usually charged by your bank or credit card issuer, is applied as a percentage of the transaction amount. Foreign transaction fees can range around 3% or more of the total purchase, but the exact amount varies depending on your bank and the type of card you use.

Foreign transaction fees are designed to cover the costs of processing international transactions. Banks argue that these fees compensate them for the additional risk and expenses involved in cross-border transfers, including currency exchange, fraud prevention, and compliance with international regulations.

Understanding Currency Conversion Fees

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On the other hand, foreign currency conversion changes are applicable when you make a cross-border transfer in a foreign currency. When you pay in a currency different from the one your card is denominated in, the transaction amount is converted into your card's currency at the prevailing exchange rate. This conversion process incurs a fee, which is commonly referred to as the currency conversion fee or the foreign exchange fee.

Your bank, credit card issuer or merchant can apply foreign currency conversion charges. These fees are typically shown as a part of the transaction amount or a flat fee. The percentage-based fees usually range from 1% to 3%, while flat fees can vary depending on the transaction value and the specific terms of your card.

Foreign Transaction Fee vs Currency Conversion Fee: Impact on Your Finances

Now that we understand the two fees more clearly, let's discuss how they can impact your finances.

1. Occurrence 

Foreign transaction fees occur when you use your card outside your home country, regardless of whether the transaction is in the local currency or your card's currency. On the other hand, foreign currency conversion charges only apply when you make a purchase in a currency different from the one your card is denominated in.

2. Fee Structure 

Foreign transaction fees are charged as a percentage of the transaction amount and can vary between different banks and cards. Currency conversion fees can be expressed as a percentage or a flat fee. It's important to check the terms and conditions of your card to understand the fee structure.

3. Cumulative Impact 

If you're not careful, foreign transaction fees and foreign currency conversion charges can add up quickly. For example, if you purchase in a foreign currency, you'll be subject to both fees—first, the currency conversion fee and then the foreign transaction fee. This means that a seemingly small percentage can turn into a substantial amount over time.

Let’s take a quick look at how foreign transaction fee vs currency conversion fee shapes up:


Foreign Transaction Fee 

Currency Conversion Fee 


Applied when using a card outside the home country

Applied when making purchases in a foreign currency


This applies regardless of the currency used

This applies only when a different currency is used 

Fee Structure 

Percentage of the transaction amount

Percentage or flat fee


Set by the card issuer or bank

Set by the card issuer, bank, or merchant


Covers costs associated with international transactions

Covers costs related to converting one currency to another

Cumulative Impact   

Can be added on top of foreign currency conversion charges

May be subject to foreign transaction fees after currency conversion

Foreign Transaction Fee vs Currency Conversion Fee: Tips to Minimise Charges and Save Money

Now that we know the differences between foreign transaction fees and currency conversion fees, let's explore some tips to minimise these fees and save money while making international transactions.

1. Choose the Right International Credit Card 

Before making international purchases, research and compare different credit cards to find the ones with low or no foreign transaction fees. Some cards are specifically designed for cross-border transfers and offer perks such as waived fees and favourable exchange rates.

2. Use Local Currency 

When given the option, choose to pay in the local currency rather than your card's currency. This way, you can avoid extreme foreign currency conversion charges. 

3. Consider Alternative Payment Methods 

Explore alternative payment methods like prepaid travel cards, digital wallets, or online money transfer services. These options often offer competitive exchange rates and lower fees than traditional credit cards.

For example, Salt Fintech is an Indian neobank that allows you to make international transactions for your business while saving up on foreign transaction fees and foreign currency conversion charges. 

4. Monitor Exchange Rates 

Keep an eye on exchange rates and consider making larger purchases when the rates are more favourable. Timing your international transactions strategically can help you save on foreign currency conversion charges.

Navigating the world of foreign transaction fees and currency conversion fees can be challenging, but understanding the differences between these costs is the first step toward making informed financial decisions. By choosing the right card, paying attention to fee structures, and using local currency whenever possible, you can minimise these fees and keep your international spending in check.

Do keep in mind that even if you make use of payment gateways like Payoneer and PayPal to make international transactions for your business, they would still be deducting significant foreign currency conversion charges and foreign transaction fees. 

On the other hand, Salt Fintech can give you the convenience of global banking with local accounts while allowing you to save up on both aforementioned charges. Visit our website today to find out more!

Frequently Asked Questions (FAQs) 

1. How can Salt assist businesses in managing international transactions? 

Salt offers services such as inward remittances and compliance handling at competitive rates. With Salt, businesses can process inward remittances within 24 hours and access compliance handling expertise, ensuring smooth international operations.

2. Are currency conversion fees the same for all payment platforms? 

No, foreign currency conversion charges can vary depending on the payment platform and the specific arrangements. Businesses need to compare and evaluate the fees offered by different platforms before deciding.

3. How can businesses minimise the costs associated with international transactions? 

Businesses can minimise costs by partnering with service providers like Salt Fintech that offer competitive rates for inward remittances and compliance handling. Comparing different payment platforms and their fee structures can help businesses identify cost-effective solutions for cross-border transfers.