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Don't Fear the Foreign Transaction Fees

Updated: Jul 4, 2023

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There is always a lot of talk about foreign transaction fees for credit and debit cards. Yes, they bite and nobody wants to pay that. There are cards out there that don't charge a fee. I have an American Express credit card I use for travel that doesn't charge a foreign transaction fee. I just pay it off when I get home.

Most of the chatter about extra fees surrounds using your card to tap in and out of public transportation vs getting an Oyster card.

A London Tube train

I use an Oyster card because I have them already. However, there is a case to be made for using a credit card or phone app loaded with your card even IF there are foreign transaction fees. It just simply may be cheaper.

First of all, don't get wrapped up in the cost of public transportation in London. Just do it and pay for it. Are you REALLY going to skip going somewhere you want to go because it might cost you money to get there. Yes, you CAN walk. But, if the walk to the Tower of London is 45 minutes, you will have used up a lot of your walking energy which you will need for the enormous Tower of London. Just get on the tube or bus and don't over-analyze the cost. It's such a minor detail in the scope of your trip.

The Oyster card costs £7 to get and is no longer a refundable deposit as it was a few years ago. If you also have more than £10 on the card when you leave, getting a refund becomes trickier than just getting the refund from a ticket machine that could do if it had LESS than £10 on it. If you INTEND to get the smaller amount refunded and you forget to do that before you leave, you are probably just stuck with that amount on the card until the next trip or it was just an expensive plastic souvenir.

 A London Underground Oyster Card

But, if you have a credit card that charges a foreign transaction fee, it may just be cheaper overall. The tube and bus have a daily cap. If you stay in Central London, the daily cap for the tube is £8.10 and the daily cap for the bus is £5.25. Most foreign transaction fees run between 1 and 5% of the amount. And, here's where it gets good. Transport for London (TFL) only charges you ONCE per day so you'll only get hit with fees on a maximum amount of either £5.25 and/or £8.10. If your foreign transaction fee is on the high side of 5%, even if you met BOTH of those thresholds (they are independent of each other), you would pay a max of .68 cents a day for your foreign transaction fees. You would have to stay in London, meeting the cap for both the tube and bus every day for 11 days before buying an Oyster card was cheaper. And, the lower your foreign transaction fee amount, the longer you would have to stay to make buying an Oyster card a cheaper option.

If your card charges an average of 3% for the foreign transaction fee, you would pay just .40 cents per day for meeting BOTH caps. You would have to stay 18 days in London before the Oyster became cheaper.

If you have to leave money on the Oyster, then it gets even more expensive vs your foreign transaction fees. Let's say you bought the card for £7 and then forgot to get your £6 refund that was left on the card. You'd have to ride the tub AND bus to the cap every day for a month for the foreign transaction fee to be more than the £13 you left on the table with your Oyster card.

So, when you're on a Facebook travel group and you see someone have a little freak out over the foreign transaction fee and 8 people tell them to "Get an Oyster card", know that they're getting potentially bad advice. Yes, a few cents every day adds up. But, it will probably not add up to the non-refundable cost of an Oyster card unless you have an unusually long stay in London.

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