What is a foreign exchange fee?

A foreign exchange fee is generally a charge of 1% applied when making a purchase in a foreign country or conducting business with an international merchant while within the United States. This fee is imposed by financial institutions to cover the costs associated with converting one currency to another.

In addition to purchases and business transactions, this fee can also be incurred when transferring funds from a U.S. bank to an overseas bank. The fee is typically a percentage of the total amount being transferred, and it can add a significant cost to international transactions.

Understanding how to calculate a foreign transaction fee is crucial for individuals and businesses that frequently deal with international currencies. The calculation is relatively straightforward: multiply the total transaction amount by the foreign exchange fee percentage.

For example, if a purchase of $1,000 is made in a foreign country with a 1% foreign exchange fee, the fee would be $10. This fee is then added to the total cost of the purchase, resulting in a final amount of $1,011.

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