A foreign transaction fee is a surcharge — typically 1%–3% of the purchase amount — added when you use a credit card for a transaction processed outside the United States or in a foreign currency. Many travel-oriented cards waive it entirely.
A foreign transaction fee is an additional charge your card issuer adds when processing a payment that routes through a foreign bank or is denominated in a currency other than US dollars. The CFPB's credit card resources note that foreign transaction fees must be disclosed in the card's rate-and-fee table — the standardized disclosure all issuers are required to provide.
The fee typically triggers in two situations: (1) you physically use the card outside the United States, or (2) you make an online purchase from a merchant whose payment processor is based abroad — even if you never leave the country. The fee is calculated as a percentage of each transaction, most commonly 3%. It appears as a separate line item on your statement or is folded into the converted transaction amount.
These are two different costs. The currency conversion rate is the exchange rate applied when your purchase is converted from, say, euros — set by the card network using their daily rate, which is typically close to the mid-market rate. The foreign transaction fee is a separate markup layered on top by your card issuer. On a $1,000 international purchase, a 3% foreign transaction fee adds $30 — before any currency conversion slippage. The FTC's guidance on using cards abroad explains how to minimize these costs.
Abroad, merchants sometimes offer to charge you in US dollars instead of local currency — called dynamic currency conversion (DCC). While it sounds convenient, DCC exchange rates are typically worse than the network rate, effectively adding a hidden conversion premium on top of any foreign transaction fee you may still owe. Paying in the local currency and letting your card network handle the conversion is usually cheaper.