It may seem like a light and inexpensive expense in the beginning. But when it all adds up, foreign transactions can cost you and your business way more than they should. Also known as a foreign purchase transaction fee, a foreign transaction fee is charged anytime you make a transaction in a foreign currency or through a foreign financial institution.
For instance, frequent travellers may find themselves having to withdraw money from a foreign ATM when they run out of cash. In the same way, when you make an online purchase from a foreign company that only processes transactions in their local currency, it’s likely that you’ll also be charged a minimal fee. More often than not, you’ll see this listed on your monthly card statement as an entirely separate charge.
Generally, the average percentage of these fees imposed by credit card issuers range from 1 to 3 per cent. Most founders pay less attention to these additional costs as 3% looks like it can’t hurt, right? While this may be true to a certain extent, there are several ways to avoid these payments, especially if they are recurring ones. These savings can then be put to more useful expenses such as scaling your operations and growing your business.
Why do these fees exist in the first place?
Foreign merchants and financial institutions charge foreign transaction fees to compensate the purchaser’s bank for converting funds into a foreign currency. On top of that, foreign merchants are also at greater risk of card fraud when it comes to overseas transactions. This is simply a way for them to safeguard their business and is standard practice for most, if not all service providers across the globe.
What if we told you there’s a way you can save money on these payments? Here are 4 simple ways to avoid them.
How do I avoid foreign transaction fees?
• Exchange currency before travelling
• Find out if your bank has a foreign partner
• Consider getting a multi-currency card
• Find a business bank account or a business account from a payment service provider with low fees
1. Exchange currency before travelling
Think of it this way. Have you ever travelled abroad without making a stop at the money exchange? If you travel for business regularly, you’ll know that exchanging currency beforehand and paying with local currency can do wonders for your wallet. When you fail to change currency before a trip, chances are you’ll have to head over to a foreign ATM to make a withdrawal. However, transaction fees on foreign ATMs can cost quite a fair bit.
Be cautious about where you exchange your money and find a money exchange that can grant you the best rates. Travelling overseas is already an expensive affair; think of all the funds you’ll be saving without those pesky charges!
2. Find out if your bank has a foreign partner
The only time when you should consider using an ATM abroad is if it is a part of your bank’s network. Sometimes, banks usually work with foreign partners to create an ATM alliance with a financial institution in the place you’re travelling to. This is to give cardholders the luxury of avoiding withdrawal fees in exchange for using their service.
Be smart about your ATM withdrawals abroad and take advantage of your bank’s overseas network.
3. Consider getting a multi-currency card
Multi-currency debit or credit cards simplify foreign payments for cardholders. Unlike your standard cards, a multi-currency card can get you better exchange rates and allow you to streamline payments to overseas suppliers and vendors. Depending on your bank, most multi-currency cards are widely accepted globally, allowing you to pay anytime and anywhere.
Improving the way you make payments and managing your money may seem like just a simple step. But this could lead to greater savings, which could mean more funds to grow your business to greater heights.
4. Find a business bank account with low fees
Back in the day, there may have been limited choices when it came to choosing a banking partner with low fees. But in today’s day and age, you can also get a business account from a payment service provider that offers low and transparent fees along with a comprehensive range of services.
As the market becomes increasingly competitive, more card companies are lowering the cost of foreign transaction fees or eliminating them altogether to create more options to meet consumers’ needs. When finding the best foreign currency account with the lowest fees, also consider any annual fees, cardholder benefits, or rewards.
Aspire: The Ideal Online Business Account for Startups
With the Aspire Business Account, you can say goodbye to paying hefty FX fees and unnecessary costs for good. On top of charging absolutely nothing on FX fees, Aspire users can enjoy a low transparent markup of 0.7% from the real exchange rate.
If that isn’t enough, say hello to virtual cards when you sign up for a free account with us! Receive all the same benefits as you would with a physical card and more—from accounting integrations, cashback on marketing spend, to automated bill payments.
What are you waiting for? Get started today!
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