The foreign transaction fee is the fee charged to your credit card for making purchases overseas, and is generally between 2-3 percent of the amount of each purchase you make. For example, if you make $1,000 worth of purchases while traveling outside of the U.S. on a credit card that has a foreign transaction fee of 3 percent, you will be charged a $30 fee. This can add up to a lot overtime, so it may be worth applying for a credit card that does not have a foreign transaction fee before going on a long trip abroad, or if you travel frequently. The credit card issuer that offers the most credit cards with no foreign transaction fee is Capital One.

The credit card foreign transaction fee is generally the combination of a fee that your network (e.g. MasterCard, VISA) charges to handle the transaction between the overseas merchant and your credit card issuer, and a fee that your credit card issuer (e.g. Bank of America, Citi) charges on top of that.

It is important to remember that you do not actually have to leave American soil to be charged a foreign transaction fee. Any time you make a purchase online that is processed through an overseas merchant, you will be charged this fee. If the prices on a website are quoted in a foreign currency, this is a good indication that you are transacting with an overseas merchant.

Another possible expense you should be aware of while using your credit card overseas is a fee from Dynamic Currency Conversion. This happens when an overseas merchant offers to convert your credit card transaction from the local currency into U.S. dollars. While it may sound tempting to see your transaction in a currency that you are familiar with, you should always refuse this offer. Many merchants will charge exorbitantly high exchange rates, as high as 7 percent, to do the conversion and pocket the difference as a fee.

Lastly, you should always call your credit card company before using your credit card to make purchases abroad so that they do not become suspicious of charges made outside the country and suspend your account.