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Last updated: 16th September, 2020

international living, moneytransfer, pagofx, travel

Foreign transaction fees explained

Whether you’re at home and buying goods from abroad or spending on the move while travelling, any time you are making a payment in a foreign currency you may incur foreign transaction fees. We’ll help you to understand what these charges are, why they exist and even how to get around them in some cases.

What is a non-sterling transaction fee?

A foreign transaction fee or international transaction fee – which is also known in the UK as a non-sterling transaction fee – is a fee that your bank charges you for using your bank card to make a purchase in a foreign currency. It used to be known as an ‘exchange rate adjustment’.

Why do banks charge these fees?

It’s more complex for banks to handle a transaction in a foreign currency, as they will need to convert what you’ve spent back into your domestic currency in order to charge your account.

Do all banks charge a foreign transaction fee?

Not all banks charge foreign transaction fees, and not all charge on all of their accounts. There is a growing trend for banks to offer accounts that eliminate the international transaction fee.

How much will I be charged?

With many cards, there is a standard charge of approximately 3% of the total amount of the purchase.*

Be aware that withdrawing foreign currency from an ATM while you’re abroad could double up your charges. Some banks will not only charge a purchase fee for using the card, but also a cash fee for withdrawing the money. And don’t forget that the bank that operates the ATM may also issue a charge.

Do you get charged more for using contactless abroad?

There is no specific extra charge for making a contactless payment, but you should definitely exercise caution. If your bank is charging you a fee for every transaction, defaulting to using contactless could mean you’re likely to make lots of smaller transactions – every time you tap your card on the machine, you could be charged.

Here’s one more handy hint: if a card machine or ATM gives you the option to either pay in sterling or in the local currency, always choose the local currency. If you choose sterling, the exchange takes place using a process called Dynamic Currency Conversion, which often offers less than favourable exchange rates – which you won’t know until the transaction is complete. Additionally, even though you may be paying in pounds, as soon as the transaction touches a foreign bank (which it will), it’s automatically flagged as a foreign transaction and will incur the corresponding charge anyway.

How can I avoid foreign transaction fees?

The simplest answer is to plan ahead for your spending and choose the best option.

Choose a card or bank account without foreign transaction fees

One option is to research and choose a bank account which doesn’t make charges for spending on your card on foreign currencies. If you’re heading abroad or know you need to make a transactions, make sure you allow enough time to open the account and complete all the necessary checks. If you’re travelling, don’t forget to let your bank know that you’re going, otherwise they may suspect the foreign transactions are fraudulent and freeze your account.

Save money on international transactions with PagoFX

While paying by card is common, there will be times that you can save on foreign transaction fees by paying directly into a bank account. For example, if you are paying for a service or paying for a rental property, the providers may allow you to make a payment directly to their bank account.

By sending money through PagoFX, the service launched by Santander, you can easily send money with any UK debit card to international bank accounts with low, transparent costs. There are no hidden fees and you’ll get the real-time exchange rate, similar to the one you’ll find on Google, Reuters or Bloomberg. As PagoFX is backed by Santander, you get the convenience of an app with the security that comes from dealing with a globally-recognised financial institution. The easy-to-use service can be set up in minutes, making it quick and easy to make low cost payments abroad.

Think about your spending patterns

Another way to save your money is through currency exchange. If you’re already abroad, it might be more economical to take a larger amount of cash out of an ATM so you only pay the fee once, and take a smaller amount of cash out with you each day for those minor transactions. An even better solution, though, is to exchange your currency before you leave the UK at the best rate you can find.

And finally, wherever possible, avoid paying in foreign currencies online. Sometimes this will be unavoidable, but there will often be similar – or even identical – items or services available in the UK, or through foreign companies that will deal directly with sterling.


So, now you’ve changed up your currency and are ready to travel though it’s always handy to have an option to take care of unexpected costs or deal with emergencies. PagoFX can be used from your smartphone with your UK debit card to make payments directly into foreign bank accounts that PagoFX offers – with low costs, transparent fees and bank-level security. Download it for iOS or Android and set up your account before you travel to make sure you’re covered while away.

(Figures correct as of 26 May 2020)
*Source: https://www.investopedia.com
**Source: https://www.moneyadviceservice.org.uk