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.
We hear the term “best exchange rate“a lot. This rate is the one that is the most economical and therefore the one that is closest to the rate indicated on comparative sites like Xe.com.
Then, you have to understand that there is an exchange rate when buying the currency and a different price when selling it. This is why you often see two exchange rate values in a bank or exchange office.
Finally, the Mastercard and Visa networks also have their rates for purchases. These rates are posted on their site. Plus, it is possible to find previous rates and indicate if your card charges a conversion fee.
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!
When you have a choice between the local currency and your currency, it is always better to pay in the local currency. Thus, you will get a better exchange rate for your purchase or withdrawal at the counter or exchange office.
Unlike purchases of goods and services, when you withdraw money from an ATM, the issuer advances you the money. Interest on the cash advance is charged immediately, unlike purchases you make on your credit card.
There are several ways to access money in local currency. These methods each have their advantages and disadvantages.
To get the best exchange rate at Disney World, you can use a credit card with no conversion fee or purchase Disney gift cards in Canadian dollars and use them at Disney World and Disneyland in U.S. dollars at the daily rate.
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.
When you make a transaction, your issuer will use an exchange rate to convert your foreign currency purchase into Canadian dollars.
Then, most institutions will add a conversion fee of 2.5% to this exchange rate.
To get the best exchange rate, you should avoid these conversion fees.
The exchange rate conversion fee is 2.5% on most cards, so for every $1,000 spent, you will pay a $25 fee.
For small amounts, the fee is negligible.
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.
In particular, the Visa-affiliated Wise debit card is a reliable solution for making withdrawals in currencies other than your local currency. Formerly known as Transferwise, Wise is an international money transfer platform that stands out for its low fees on foreign currency withdrawals.
Once you have created your Wise account and obtained your debit card, you can load your account with Canadian dollars and withdraw money in the currency of the country where you are located. Conversion costs are generally much lower than for conventional credit cards. In France, for example, the fee is 0.53%, while in Morocco it is 1.53%.
Finally, another option is with Wealthsimple Cash is an integrated financial ecosystem that brings together a current account, a high-yield savings account and a reloadable Mastercard. For frequent travelers, this card represents an interesting alternative for avoiding the conversion charges associated with foreign currency transactions.
The Wealthsimple Cash Mastercard does not charge fees for ATM withdrawals globally, although some ATMs may apply their own fees.
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:
We must also pay special attention to transaction dates: if your purchase transaction is pending, we must take this into account in our calculations so as not to pay interest on the cash advance.
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.
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.
Beware! Depending on your bank and account type, if you usually pay a fee for over-the-counter withdrawals, you may have to incur this fee with currency orders as well.
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!
To order foreign currency in this way, you will need to:
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.
When you make ATM withdrawals, you usually have to pay:
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!
This list was made possible by the members of the Milesopedia Facebook community. These kinds of discoveries are made mainly by trial and error; they are always subject to change. Join us and write to us so we can expand and maintain this repertoire together!
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:
In this example, you get the best exchange rate with an over-the-counter withdrawal with a no-conversion fee credit card or a prepaid card.
Withdrawals are at a non-Global ATM Alliance branch in the United States.
In this example, you get the best exchange rate by withdrawing at the counter with a Tangerine customer debit card.
Withdrawals are at a Bank of America branch in the United States.
We can see that the savings are much greater when the amount is higher with a better exchange rate despite transaction fees. Tangerine allows you to save money at partner locations as well.
So, as always, do your math and assess your preferences!
By paying for your purchases with a credit card without conversion fees, you will get the best exchange rate for your trip.
With a prepaid credit card, you can minimize transaction fees and get cash at the best exchange rate.
For currency exchanges, exchange rates are similar from one institution to another. You will need to shop around for a currency exchange that has a difference in rates and does not charge a commission.
When your trip is booked, do a little research on the rate trends. If the trends show that the rate is falling against the Canadian dollar, go for it! Otherwise, wait until closer to your trip.
To avoid theft and loss, it is suggested that you have no more than $300 in cash. This way, you can maximize your credit card purchases without conversion fees and only use cash when the credit card is not accepted.
There are conversion and transaction fees from your bank and ATM withdrawal fees when travelling.
It will depend on the amount, but generally, the exchange rates are similar. However, less common currencies are generally exchanged at a better rate locally than in Canada.
The common currencies are the US dollar, the euro, the British pound, the yen, and the yuan.
In general, a withdrawal with a prepaid credit card with no conversion fee will give you the best exchange rate when travelling.
With a credit card without conversion fees, you can get the best exchange rate on your purchases. Then, a prepaid credit card or a banking package with minimal transaction fees will be the winning combination for withdrawing money while travelling.
Savings are here:
