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Save money on your foreign currency transactions

To the point You live in Canada and use a credit card to pay for all your current transactions. But what about when you leave the country, whether it's to go to the United States or anywhere else in the world? Before we reveal to you the best solutions to save on foreign currency transactions, a quick reminder of the different possibilities for foreign currency transactions.

The different possibilities for foreign currency transactions

To pay abroad, several solutions exist:

  • Currency exchange
  • Cash withdrawals
  • Payments
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Exchange Canadian dollars for local currency

Exchanging Canadian dollars before departure makes sure you can pay almost all the merchants… but is not the most optimal for several reasons.

1- Foreign exchange transaction fees

Whether in Canada or upon arrival in the country you are visiting, you will have to exchange your Canadian dollars for the local currency, which will result in a fee.

Currency exchange/currency conversion fees“: the exchange office “sells” you foreign currency in exchange for your Canadian dollars at the rate it wants.

This rate will include the exchange rate (which will therefore be “hidden”).

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By comparing with the market rate, you can guess how much this transaction will cost you.

Example: the market rate for US$1 is CA$1.30. If your exchange office sells you that same US$1 to 1.35 CA$, it means that it charges you a fee of 3.8%.

For a transaction that allows you to get US$1,000, you will have to pay $1,350. The exchange fee here is about $50.

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Avoid currency exchange at an airport. It’s a last-minute solution and exchange offices know it: the fees will be much higher, whether it’s at your departure or arrival airport.

2- Refusing your money

Want to rent a car? Staying in a hotel?

In many cases, the credit card is unavoidable because it is guarantee for the merchant.

It will be very rare for a car rental agency or hotel to accept cash for this.

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3- The risk with a wallet full of cash

If your wallet is stolen, no recourse will be possible unlike credit cards!

Around the world, we are increasingly moving towards digital payment solutions. In some countries, cash is no longer accepted for services as basic as taxis!

However, it is always helpful to have some “local” money when visiting a foreign country.

Personally, for any destination around the world, I have about 100 CA$ in local currency in my wallet. It’s enough before being able to withdraw money, but especially to pay with my credit cards And I always bring a few 20 US$ bills: no one will refuse them!

Money withdrawals abroad

Two ways to withdraw money:

  • with a debit card
  • with a credit card

Not sure what the difference is between a debit card and a credit card? Read our post about it.

Withdraw money abroad with a Canadian debit card

The debit card allows you to have direct access to the funds available in your checking or savingsaccount.

Beware, however, of several aspects:

  • Your card’s network (Visa/Mastercard): Some ATMs may refuse one of these networks.
  • Preset limits: Your card issuer limits the amount you can withdraw per withdrawal and/or per week. Find out before you leave and change your limits accordingly!
  • Fees: There will be several fees depending on your card:
    1. foreign exchange/currency conversion fees: a rate decided by your card issuer
    2. Withdrawal fee: a fixed fee per withdrawal or variable depending on the amount withdrawn
    3. ATM fees: a fixed fee charged by the ATM operator
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Some debit cards are more advantageous than others for withdrawals abroad.

For example, Scotia/Tangerine are members of the Global Alliance, a collective of banks that allow their customers to withdraw money free of charge from ATMs of the Global Alliance network.

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For Scotia/Tangerine debit card holder, for example, it is possible to withdraw with no ATM fees at Bank of America ATMs in the United States or BNP Paribas in France.

However, the currency conversion fee willapply.

Money withdrawal abroad with a Canadian credit card

The same warnings as debit card withdrawals apply to credit cards.

But other much higher fees will be added because the credit card is mainly a PAYMENT method and not a WITHDRAWAL method !

Issuers will then charge:

  • a cash advances interest rate (between 20-30%)
  • a fixed or variable fee per withdrawal

We therefore advise against withdrawing money with your credit card.

However, if you find yourself in an emergency situation and need to withdraw money from your credit card, we advise you to immediately pay integrally your entire credit card.

Indeed, interest in cash advances begins to accrue from the withdrawal, as pointed out in this infographic by the Financial Consumer Agency of Canada.

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Some people advise overpaying your credit card in order to avoid those fees.

However, it does not always work – it will be on a case-by-case basis depending on the institution. In addition, should your card ever be compromised/hacked, the risk would be that it would not be insured by the issuer for the “creditor”portion.

Payments abroad

After withdrawals, let’s take a look at paying with your debit/credit cards abroad.

But first, an important reminder:

ALWAYS choose to pay in local currency, not In Canadian dollars!

Indeed, the exchange rate is free… and it is EVERY TIME disadvantageous compared to the one charged by your bank.

Lately, in Greece, I have seen that if I chose to pay in Canadian dollars, then a conversion fee of 10% was charged by the merchant !

While choosing to pay in euros with my Scotiabank Passport Visa Infinite*Card, this fee was 0%!

Payments abroad with a Canadian debit card

As with withdrawals, foreign currency payments with a Canadian debit card will be impacted by preset limits and various fees.

However, this can prevent you from carrying cash with you from Canada, which can reassure some. However, we would prefer this alternative: to pay with a Canadian credit card.

Payments abroad with a Canadian credit card

Most Canadian credit cards will allow you to pay directly to any merchant abroad.

However, different fees will impact each transaction:

ATM Withdrawal Payments with the card
Cash advance fees % of the amount withdrawn and/or fixed fee in $
Conversion fees Between 0% and 5% of the amount Between 0% and 5% of the amount
Visa/Mastercard Network Fees Between 0% and 2% of the amount Between 0% and 2% of the amount
Interest fees on cash advances Between 20% and 30% per year without grace period
Interest fees on purchases Between 15% and 30% per year with grace period
ATM fees Between $0 and $10

Now let’s take the same chart, with a purchase or withdrawal of $1,000 with the most common Canadian credit card fees:

ATM Withdrawal Payments with the card
Cash advance fees $7.5
Conversion fees 2.5% = $25 2.5% = $25
Visa/Mastercard Network Fees 1% = $10 1% = $10
Interest fees on cash advances 20% = $17
Interest fees on purchases – **
ATM fees $5
Total fees for $1,000 $47.5 – $64.5 $35

Interest charges on cash advances apply from the grace-free withdrawal: to avoid them, pay your credit card immediately!
We assume that you pay your credit card balance on time to avoid interest charges on purchases.

You see, for $1,000, if you withdraw at a counter you will pay between $45 and $65 in fees! If you make a transaction, it is a $35 fee.

However, some credit cards stand out from the competition… to form the best solution to save on foreign currency transactions.

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The best way to save money on foreign currency transactions

Three credit cards issued by Canadian banks are the only ones that do not charge any conversion fees for your foreign currency transactions:

Conversion fee: 0% !

With this benefit, for each transaction, you save a fee of 2.5%.

The exchange rate obtained will most of the time be very close to the interbank exchange rate. In any case, it will be much more advantageous than the one from exchange agencies.

No transport of foreign currency

One of the traveler’s fear: to have his money stolen!

We mentioned it above: in the event of cash theft, you will have absolutely no recourse.

By using your credit card, you take away that risk!

Fraud insurance

Your credit card has been compromised and money has been taken from your account?

No problem: you’re not responsible!

Upon review, your credit card issuer will refund money improperly taken from your account.

Higher limits

The DEBIT card often limits you to both withdrawals and payments you can make.

This is not the case with the credit card: the limit will be the one set (5,000 – 10,000 CA$…).

Points and miles earning

Finally, a very important aspect for points & miles hunters: each transaction on your credit card will earn points and miles!

For example, if you charge 1,000 euros of travel purchases to your HSBC World Elite MasterCard (car rental, hotels, airfare…), which is about 1,500 CA$, you will get 6 points per Canadian dollar.

This means you’ll earn 9,000 points (a $45 value)!

For Scotiabank’s American Express Gold card, all purchases made abroad will earn 1 point/dollar. On the other hand, the buying categories in Canada are more interesting: up to 5 points per dollar.

Points that you can easily apply as a statement credit to your travel purchases!

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You can see it: you need to plan your money needs when going abroad !

If the payment solution with a credit card that does not charge any foreign currency conversion fees is ideal, no other options should be set aside, for all the reasons mentioned above.

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