Look closely at your credit card statement after a trip out of the country and you’ll notice that your credit card company did you a favour by converting all of your foreign transactions into Canadian dollars.
While the conversion is done for you at the market rate, the credit card issuer then tacks on another 2.5 percent for its trouble. Since the fee is blended into your foreign currency conversion, the consumer is none the wiser.
The currency conversion fee isn’t set by Visa or MasterCard; it’s an optional fee charged by the company issuing the credit card — typically a bank. Since foreign currency fees make up a significant source of revenue, especially for travel cards, almost every card issuer in Canada charges the 2.5 percent fee to its customers.
These fees add up to millions of dollars unnecessarily spent by Canadian travellers.
How To Beat The Foreign Currency Fees
Chase Canada is the lone credit card issuer who has chosen not to charge this optional fee on foreign exchange. The company issues credit cards for popular retailers like Sears, Future Shop, and Best Buy.
They’ve added two other cards that frequent travellers should consider in order to save money on foreign currency fees.
First is the no-fee Amazon.ca Rewards Visa, which launched in April, 2012. Purchases made with the card earn you Amazon rewards points that you can redeem online — 2,000 points is worth a $20 Amazon.ca gift card. You’ll get two points for every dollar spent on Amazon.ca and one point for every dollar spent elsewhere.
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Another Chase issued credit card that’s worth a look is the Marriott Rewards Premier Visa. This hotel credit card launched in September, 2012 and comes with a $120 annual fee, which is waived in the first year. You’ll also get 30,000 bonus points after your first purchase, plus a free night stay (together, that’s enough for five free nights).
The biggest feature of both the Amazon.ca Rewards Visa and the Marriott Rewards Visa is when you make a purchase in a foreign currency you’ll only pay the exchange rate — no foreign currency transaction fees.
A 2.5 percent savings in foreign currency transaction fees is a big deal for travellers when you consider that most travel rewards credit cards only give you one or two percent back on your spending.
So while foreign exchange fees all but eliminate any benefits consumers receive from their rewards, the real question is; what are the alternatives when travelling abroad?
The Government of Canada recommends that you use a major credit card for big purchases like your airfare, hotel bills, and restaurant tabs, in most countries. Use the credit card instead of cash wherever possible.
They also suggest you bring enough cash to get by for a couple of days and keep it in a money belt or in several different pockets in case your wallet is lost or stolen or your bank accidentally freezes your cards.
Other tips to consider when travelling abroad:
Your debit card probably won’t work at most stores or restaurants abroad, so you should carry some cash to cover daily expenses. Always use bank-affiliated ATMs when you travel, but be aware that your debit card may not work in every ATM machine in your destination country.
Related: The Many Hidden Costs Of Travel
Canadian travellers’ cheques are not widely accepted around the world, but if you prefer to use them instead of credit or cash, order the cheques in the local currency and carry multiple cheques in small denominations. If you can’t order cheques in the currency of your destination country, order them in U.S. funds, which are widely accepted.
Travelling can be expensive enough when you consider the cost of flights, hotels, and rental cars. Look at how much you pay in foreign currency fees if you frequently travel outside the country and find a way to get around those charges by using a no-foreign transaction fee credit card.
How do you pay when travelling outside of Canada?