Guide: How to get the best exchange rate when travelling?

In general, it is always best to pay for your expenses abroad with a credit card since you get the best exchange rate (the daily rate), and you can earn rewards points on top of it.

However, most credit cards will add a 2.5% surcharge to the exchange rate; the conversion fee. To remedy this inconvenience, arm yourself with a credit card that has no conversion fees!

However, in many countries where “cash is king”, it is not always possible to rely solely on our credit cards; it becomes unavoidable to carry cash and exchange your currency.

Additionally, in some places, the merchant is within his or her rights to impose additional fees when paying by credit card; for example, in Australia.

Before we look at the different types of withdrawals you can make to get currency, let’s take a look at dynamic conversion.

When you pay at a merchant with your credit card, the payment terminal may offer you to pay in local or Canadian currency.

ALWAYS choose to pay in local currency: in this case, the conversion to Canadian currency will be done at the best daily Mastercard, Visa or American Express rate. Plus a 2.5% conversion fee (unless your card is one of those that do not charge a conversion fee).

If you choose to pay in Canadian currency, the merchant’s exchange rate will apply PLUS any other fees normally charged by your credit card.

Here’s an example of payment in Europe with the Scotiabank Passport™ Visa Infinite* Card. For a purchase of 283.80 euros, the merchant’s payment terminal offers to convert the amount into Canadian dollars at 384.55 CAD, including a 3% conversion fee:

On the transaction date of July 31, 2022, the Visa currency converter indicates that the transaction was for $372.99. Thus, you will have paid the merchant a conversion fee of $11.56!

There are several ways to access money in local currency. These methods each have their advantages and disadvantages.

The easiest way is to withdraw money with a debit card; you will get the best exchange rate (daily rate), but it will be increased by a conversion fee of 2.5%.

Typically, all Canadian banks are linked to major international networks such as Interac, Plus, Maestro and Cirrus. These logos can be found on the back of your card.

• Very accessible worldwide
• No need to worry about paying interest
• No residual balance on the card to manage
• Daily exchange rate

The way to save money on foreign withdrawals is with a prepaid card. Some cards will even allow you to load the card and then make a withdrawal in foreign currency without having to pay the conversion fee (or a lesser fee).

Like the debit card, this is one of the best exchange rates when travelling (daily rate). It is in fact the preferred way because you will avoid the conversion fees.

• Very accessible worldwide
• No need to worry about paying interest
• No conversion fee
• Daily exchange rate

The use of credit cards is tricky for over-the-counter withdrawals, as they are considered cash advances. So, you have to be very organized to make this profitable; you should not aim to have the best exchange rate when you have to pay other fees in return!

For purchases, you have a grace period where you don’t have to pay interest; you generally have up to 21 days after the statement closes to pay your balance without incurring interest.

For cash advances, interest is charged immediately after the transaction. So, to save money on travel withdrawals, your balance must be positive (i.e. you don’t owe the bank any money).

It is also important to know that when you pay back the money on your credit card, that money is first paying for your purchases. So, if you want to make a withdrawal and you have purchases to make as well, you’ll need to consider them.

Here is an example of how to avoid paying interest charges when withdrawing money with a credit card:

It is indeed a bigger headache to use a credit card, so why do it? The main advantage is avoiding the 2.5% conversion fee. For larger amounts, the difference is significant as you avoid these conversion fees and get the best exchange rate when travelling.

• Very accessible worldwide
• No conversion fee
• No residual balance on the card to manage
• Daily exchange rate

Of course, your bank can sell you foreign currency. In fact, you can place an order from your online profile.

However, this is not always the best exchange rate when compared to Mastercard and Visa rates. Then you have the option of picking up your money at the branch or having it delivered to your home for a fee. The amount will simply be deducted from your account.

• No need to move (with delivery charges)
• No residual balance to manage
• No need to worry about the interest on cash advances

Canada Post, in partnership with CIBC, offers a service where you can place an order for foreign currency and it will be sent to you by mail.

The exchange rate is increased by 2% to 5% depending on the currency, but it is quite convenient to receive the money directly to our mailbox!

• No need to travel
• No residual balance to manage
• No withdrawal fees from your bank to pay
• No ATM withdrawal fee to pay
• No need to worry about the interest on cash advances

Finally, are currency exchange offices a good option? The exchange rates of the offices vary greatly. Some places offer a better exchange rate than your bank or a comparable rate, but you could also find very unfavourable rates.

To get foreign currency with the offices, store around and compare; one place might have a better exchange rate for one currency, but not for another!

Finally, exchange offices located at the airport and in tourist areas should be avoided if you want to get the best exchange rate while travelling.

• No residual balance to manage
• No withdrawal fees from your bank to pay
• No ATM withdrawal fee to pay
• No need to worry about the interest on cash advances

When it comes to your bank’s fees, you can sometimes save on withdrawals with certain packages. However, when you are abroad, the ATM you have chosen may also charge you a fee for the withdrawal.

Here is a table of foreign banks we found that do not charge! With a credit card like the Scotiabank Passport™ Visa Infinite* Card or the Wise Card, you’ll get the best exchange rate and the most savings with these financial institutions!

For Tangerine customers, you can save on withdrawal fees at banks in the Global ATM Alliance network. Withdrawal fees are even waived at several banks: Bank of America, Barclays, BNP Paribas, Deutsche Bank, Scotiabank, and Westpac.

Finally, the withdrawal fees at Tangerine are very competitive when compared to other banks.

To open a Tangerine account, click here.

So, what method should you choose to get the best exchange rate while travelling and save on withdrawal fees?

It depends! Each method has its pros and cons. It’s up to you to decide what’s best for your situation. To help you visualize the figures for each option, here are some examples: