How to avoid paying foreign transaction fees

4 minutes
Business tipsFinance
How to avoid paying foreign transaction fees
In this article

For any business, setting a budget is crucial to account for the money coming in but also the expenses to be paid out. Regular expenses can include anything from operational purchases, capital purchases, bills, and staff wages, but not all expenses can be predicted ahead of time.

Certain transaction fees, such as bank fees, can include hidden costs that were not accounted for and can easily eat away at a perfectly crafted budget.  Foreign transaction fees can be notoriously high, and a hidden, poor FX rate leads to more money in your bank’s pocket, and less in yours.

Here are some of the common foreign transaction fees to look out for.

Common foreign transaction fees

Currency conversion fees

When you purchase or pay money internationally you get charged a fee for the conversion of your currency into the receiving currency. This is typically around 1-4% of the total amount. You can expect this fee whether you pay by credit card, bank transfer, or other methods.

Dynamic currency conversion fees

Have you ever paid an international supplier and had the option to pay in AUD? While you think you may avoid foreign transactions, you’ll still be charged a fee—in this case, a fee for a third party undertaking the conversion. When using this method, keep an eye on the exchange rate on offer as it’s usually significantly less than the real, interbank FX rate.

Credits card and payment network fees

Foreign transaction fees on credit cards are one of the more common transaction fees. Typically charged at 1-3% by banks, credit card companies, and payment networks, you receive these fees to cover the cost of conversion from all parties involved. Namely, from your bank, the recipient’s bank, and from the payment network that was used in this transaction.

Banks are also known to charge high flat fees for these payments, from $6 up to $30, per transaction. So if you make a lot of international payments, this adds up fast.

How to avoid paying foreign transaction fees on transfers

As a business with international vendors, international payments are inevitable. But foreign transaction fees don’t have to be.

If you choose to do a bank-to-bank international transfer, this means you’re leveraging local bank networks to pay your vendors, rather than using the SWIFT network. In this case, you’ll only need to pay minimal bank transfer fees, instead of the hefty SWIFT transfer fee.

In some cases, you may be able to open a bank account or credit card in your vendor’s country, although this can be tricky for foreign businesses.

A way to avoid paying foreign transaction fees on transfers is to use a transfer provider that looks out for businesses like yours. Airwallex helps you make international transfers easily. We don’t charge you any foreign transaction fees, and you only need to pay a small 0.3-0.6% margin on your FX. 

How to avoid paying foreign transaction fees on card payments

Credit cards make international payments quick and easy. But if you don’t do your research, some cards can hit you with high foreign transaction fees.

It always pays to read the fine print of your card provider to see their fee structure. If you find that their fees are too high, consider switching to a different card. Or choose a new credit card provider altogether.

These days there are numerous credit cards available where you won’t pay any foreign transaction fees.

If you’re after an even more flexible service, Airwallex Borderless Cards are a smart option to avoid paying foreign transaction fees on your card payments. There are no monthly fees, no annual fees, and you won’t pay any fees on foreign transactions. Just a small margin on FX of either 0.3% or 0.6%.

How to avoid paying foreign transaction fees when buying supplies from overseas

Even in disrupted times like we’re living in today, businesses can’t avoid buying supplies from overseas. But there are ways to make the process more cost-effective.

You can choose to pay the supplier in their local currency via a bank-to-bank transfer. This way you avoid the SWIFT network, and extra bank fees.

It’s also smart to double-check your preferred payment method prior to paying, particularly for big-ticket items. These methods are normally charged as a fee percentage, which means your costs scale as your purchases do.

Avoid paying foreign transaction fees altogether

Airwallex is designed to ease the fee burden on businesses.

With our products, you get access to our interbank FX rate, which is up to 90% cheaper than anything offered by the banks. And with only a minimal (and transparent) margin on top, you know exactly what you’re paying per transaction.

Our Borderless Card payment options have zero foreign transaction fees, and no monthly fees, so there’s no charge simply for using the service.

Airwallex Foreign Currency Accounts mean you can hold a business account in a foreign currency, where you can receive and pay money directly in your desired currency—avoiding the banks entirely.

Airwallex enables you to make your payments faster, with less hassle, and at a better rate. Contact us today to organise a demo and learn more about how your business can avoid paying foreign transaction fees altogether.

You can also join our upcoming Grow Without Borders eCommerce Webinar Series by clicking here.

Related article: 6 surprising Reasons Why Your Bank Transfer Is Delayed

Our products and services in Australia are provided by Airwallex Pty Ltd ABN 37 609 653 312 who holds AFSL 487221. Any information provided is for general information purposes only and does not take into account your objectives, financial situation or needs. You should consider the appropriateness of the information in light of your own objectives, financial situation or needs. Please read and consider the Product Disclosure Statement available on our website before using our service.

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