Foreign transaction fees: What they are and how to avoid them

Key takeaways:

• Foreign transaction fees are charges applied when you spend or send money in a currency that isn’t your own. For Singapore cards, these usually range from 3–3.5%¹, but can be higher depending on how you pay.

• These fees include card network charges, card issuer fees, currency conversion markups, and optional dynamic currency conversion (DCC), all of which can quietly add up.

• Modern fintech platforms like Airwallex offer multi-currency accounts and cards with zero or minimal foreign transaction fees, letting you save on international payments.

Whether you’re paying overseas vendors, booking flights, or running social media ads, international business expenses can add up quickly. What’s easy to miss is the foreign transaction fees quietly chipping away at your bottom line.

These fees might seem small at first, but over time they can have a real impact on your profits. But by using multi-currency accounts and corporate cards with low or no foreign transaction fees, you can minimise these fees and keep more of your money.

Let’s take a closer look at what foreign transaction fees are, and how they work.

What are foreign transaction fees?

Foreign exchange fees are the extra costs you’re charged when you spend or send money in a currency that isn’t your own. You’ll usually run into them when you use your corporate card for overseas payments or move money to an international bank account. 

In Singapore, these fees often show up as a percentage added on top of your transaction, and they’re easy to miss until you look closely at your statement.

FX fees on card payments

When you pay in a foreign currency using a Singapore-issued card, most banks charge a total of 3–3.5%¹ of the transaction amount. 

For every foreign card payment, you’ll always pay fees to two main parties:

1. Card network: Visa or Mastercard handle the payment infrastructure and often add about 1% for currency conversion and processing².

2. Card issuer: Your bank (e.g., DBS, Citi, OCBC, UOB) manages your account and usually charges around 2–3% for processing overseas transactions².

On top of that, you may also have additional costs from:

1. Currency conversion markups: Currency conversion markups are usually hidden in the exchange rate you receive, where the card network or merchant adds a small percentage on top of the interbank rate.

2. Dynamic Currency Conversion (DCC): If you pay in SGD instead of the local currency, the merchant sets the conversion rate. DCC usually comes with worse rates and extra markups, sometimes pushing fees into the high single or double digits.

Since up to four different fees can be applied to a single transaction, costs can add up fast – especially if your business makes recurring international payments like software subscriptions, ad spend, or vendor bills.

Here’s a visual representation:

How do foreign transaction fees impact business owners?

For businesses that operate across borders, foreign transaction fees can quickly add up. 

For example, if your Singapore business pays suppliers in China, subscribes to SaaS products in the US, or serves customers across Southeast Asia, you’re likely making and receiving international payments regularly. Employees travelling to other countries for meetings and offsites add another layer of cross-border spending.

Here’s how foreign transaction fees impact your business:

• Higher costs: Every overseas payment comes with fees: from card issuers, networks, and sometimes dynamic currency conversion. These charges increase your operating costs and eat into your profits.

• Exchange rate fluctuations: The fees and exchange rates you pay can change between the time of purchase and when the transaction settles, making budgeting and cash flow planning more difficult.

• Unfavourable exchange rates and unnecessary conversions: Card issuers and networks add a markup to the interbank rate. Some Singapore cards even convert foreign currencies to USD before converting to SGD, so you lose money at each step.

• Complex financial management: Between fluctuating rates and multiple fees, it becomes harder to predict expenses and manage cash flow, especially if you’re paying multiple vendors or running international ad campaigns.

How to calculate foreign transaction fees (with examples)

Whenever you or your employees use a corporate card to pay in a foreign currency, the transaction goes through a conversion and settlement process, and that’s where foreign transaction fees come in.

Let’s walk through two examples: one without DCC, and one with DCC, so you can see how fees can differ.

Example: Paying for a hotel in Hong Kong (without DCC)

Say you’re travelling to Hong Kong and need to pay HK$1,200 for a business hotel. At the front desk, the hotel checks with your card issuer to confirm you have enough credit or funds.

Once approved, your card issuer and the network convert the HKD to SGD. There are two parts to this:

• Part 1: Currency conversion via USD. Most Singapore cards first convert foreign currencies to USD, then to SGD.

• Part 2: Exchange rate. Card networks (Visa or Mastercard) either use the interbank rate or set their own rate for the conversion.

Here’s where additional fees come in:

• Part 3: Card network fee

  • Visa or Mastercard typically adds 1% on top of the conversion.

• Part 4: Card issuer fee

  • Your bank adds around 2.25% as an administrative fee for processing the transaction.

Here's how it breaks down:

Example: Paying for a hotel in Hong Kong (with DCC)

Let’s say you booked your hotel room online and chose dynamic currency conversion (DCC). This optional service lets you pay in your home currency (SGD) rather than the local currency (HKD), so you see the total in SGD without doing any math.

When you use DCC, the merchant sets the conversion rate at the point of sale. The rates offered through DCC are almost always worse than what your bank or card issuer would give you, so you end up paying more than if you let your card handle the conversion in the foreign currency.

Here's what that looks like:

The key takeaway: paying in your home currency with DCC may feel convenient, but it often ends up costing your business significantly more than letting your card handle the conversion in the local currency.

4 common foreign transaction fee mistakes to avoid

Watch out for these common mistakes that can cost your business more than you expect.

1. Accepting Dynamic Currency Conversion (DCC)

When a card machine overseas asks if you want to pay in SGD, always decline. DCC usually comes with a worse exchange rate and extra charges from the merchant.

2. Using a card without checking its fees

Before travelling or making international payments, review your card’s terms. Know exactly what foreign transaction and currency conversion fees you’ll be charged.

3. Overlooking your currency balances

Make sure you have enough funds in the currency you plan to pay with. If you pay from a different wallet, your money will still be converted, even if you have the right currency in another account.

4. Assuming that “no foreign transaction fees” means no cost

Some cards skip the issuer’s admin fee but still apply currency conversion markups. Always check the total cost, not just the advertised “no fee” label.

How you can avoid foreign transaction fees

Card payments are convenient, but when you’re dealing with foreign currencies, they can add unnecessary costs. The good news is that you can reduce (or even eliminate) these fees for your business. Here are some practical strategies:

1. Use a multi-currency corporate card

Multi-currency cards and cards that let you hold and spend in multiple currencies, and they help you cut down on conversion costs. For example, the Airwallex Corporate Card draws directly from your business account wallet in the currency you need, avoiding foreign conversion fees. If you don’t have enough in that currency, the card converts funds at a small, predictable fee.

2. Look for cards with no foreign transaction fees

Many card issuers add an administrative fee for overseas payments. When comparing corporate cards, prioritise options that charge no admin fees, like our Corporate Card.  

3. Consider wire transfers or local payments rails 

For high-value cross-border payments, using wire transfers or local payment networks (“local rails”) can be cheaper than paying by card. With Airwallex, you can send payments using local rails to 120+ countries with no transfer fees.

3 benefits of multi-currency cards for businesses

As we discussed in the previous section, multi-currency cards are a smart way to cut foreign transaction fees. Here’s how these cards can benefit your business:

1. Avoid unnecessary currency conversion

Multi-currency cards connect to accounts or wallets where you can hold multiple currencies. When you pay in a currency you already have, there’s no conversion needed.

2. Simplify expense tracking

These cards pull all your international transactions into one account, making it easier to track spending, reconcile accounts, and keep your financial reports accurate.

3. Global acceptance

Multi-currency cards work with major payment networks like VISA or Mastercard, so your team can pay anywhere in the world without hassle.

Frequently asked questions (FAQs)

Is 3% a high foreign transaction fee?

A 3% foreign transaction fee is considered typical for most credit and corporate cards in Singapore. While it might not seem like much for a single payment, these fees add up quickly if your business makes frequent international payments or large purchases. Over time, repeated charges can significantly increase your operating costs, which is why businesses often look for multi-currency cards or cards with no foreign transaction fees to save money.

What's the difference between foreign transaction fees and currency conversion fees?

Foreign transaction fees are extra charges your card issuer adds for international payments. Currency conversion fees are hidden in the exchange rate, where networks or merchants add a markup. Both increase the cost of paying in another currency.

Can I avoid foreign transaction fees if I pay in my home currency (SGD)?

No, paying in SGD overseas usually triggers dynamic currency conversion (DCC), which comes with poor exchange rates and extra fees. You’ll generally pay less if you pay in the local currency and let your card handle the conversion.

Are there any hidden fees associated with foreign transactions that business owners should be aware of?

Yes. Beyond visible foreign transaction fees, business owners may face currency conversion markups, dynamic currency conversion (DCC) charges, and sometimes multiple conversions between currencies. These hidden costs can quietly increase the total expense of international payments.

How do multi-currency business accounts help reduce foreign transaction fees?

Multi-currency business accounts let you hold and spend in different currencies. By paying directly from the currency you already have, you avoid extra conversions and foreign transaction fees, making international payments cheaper and more predictable.

Sources:

1. https://www.singsaver.com.sg/credit-card/blog/credit-card-fees-and-how-to-avoid-them

2. https://www.dbs.com.sg/personal/cards/cards-rates-fees.page

3. https://www.investopedia.com/foreign-transaction-fee-vs-currency-conversion-fee-know-the-difference-4768955

*Note: This publication does not constitute legal, tax, or professional advice from Airwallex nor substitute seeking such advice, and makes no express or implied representations/warranties/guarantees regarding content accuracy, completeness, or currency. Airwallex (Singapore) Pte. Ltd. (201626561Z) is licensed as a Major Payment Institution and regulated by the Monetary Authority of Singapore.