Credit cards with no foreign transaction fees are designed to help you save money when travelling or shopping overseas, by offering you 0% fees.
We’ll help you make an informed decision when choosing a credit card with no foreign currency conversion fees, go through different travel money expenses and show you how to get the most out of your money when you’re overseas or shopping online.
Compare no foreign currency exchange fee credit cards
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How do foreign transaction fees work?
When you make a purchase or transaction in a foreign currency using a Canadian credit card, the total amount needs to be converted into Canadian dollars. The conversion process varies, based on factors including the card provider and whether it’s an American Express card, Mastercard or Visa card. Currency conversion exchange rates are updated on a daily basis and apply even if you have a card that charges $0 foreign fees. Please note that most banks use an exchange rate that’s less competitive than the standard rate.
Most credit cards charge a fee of 2–3% for each international transaction you make, whether you are travelling overseas or shopping with an international retailer. But credit cards with 0% foreign fees waive this cost, helping you save on charges when you make overseas purchases.
How much can I save with a 0% foreign fee card?
To give you an idea of the potential savings a credit card with 0% foreign fees offers, we’ll consider the following example. Let’s say you spend $5,000 while you’re travelling overseas. If you had a card that charged a 2-3% fee on each foreign transaction, you’d pay around $100-$150 more for your spending.
A card with 0% foreign transaction fees would add $0 to your account balance. As well as saving you money on your spending, this would also cut down on interest charges and could help you pay off your balance faster.
How will an exchange rate appear on my credit card statement?
Say you were on a trip to New York and used your Canadian credit card to pay for a pair of shoes worth US$100. If the exchange rate between US dollars and Canadian dollars was US$1.28 per CAD 1, then this transaction would be converted to CAD 128.44. So, instead of your credit card statement showing a transaction of US$100, it would show one of CAD 128.44.
How to compare 0% foreign fee credit cards
A few credit cards offer 0% foreign transaction fees, so what else should you compare when considering a credit card to use overseas? Consider these factors:
- Overseas ATM withdrawal fees. Getting cash out of an ATM overseas can also attract a fee of at least $3, or between 2-4% of the total transaction amount. Choosing a card which doesn’t have a fee for international ATM withdrawals will allow you to avoid this charge. One way to avoid this fee is to select a provider and card that works with a global ATM network, such as Scotiabank, who are members of the Global ATM Alliance, allowing you to take out money at millions of ATMs worldwide.
- Cash advance fees. Even if you get a credit card that offers $0 ATM fees overseas, using it to withdraw cash can attract a cash advance fee that’s typically between 2-4% of the transaction amount. You’ll also be charged interest at the cash advance interest rate, which is higher than the purchase rate on most credit cards.
- Annual fees. Some credit cards with 0% foreign fees may also come with a $0 annual fee, but others may come with yearly fees, which can reach into the hundreds of dollars. If it does have an annual fee, make sure that the perks you’ll get from the card outweigh this cost.
- Purchase rates. If you’re using your card to make overseas purchases but won’t be paying back your balance in full each month, you’ll need to consider the purchase interest rate.
- Other travel benefits. Some cards offer additional travel benefits, such as complimentary travel insurance, airport lounge access or bonus frequent flyer points for your spending. Make sure you meet any requirements listed to take advantage of these perks, otherwise they won’t add any value to the card.
What is Dynamic Currency Conversion?
When you shop overseas with a Canadian-issued card, you may be asked if you’d like to spend in the local currency or Canadian dollars. This refers to Dynamic Currency Conversion (DCC) and opting to pay with Canadian dollars will collect a DCC fee that’s usually between 3% to 10% of the transaction amount. If you’re spending with a card with 0% on foreign transaction fees, you should always opt to pay in the local currency rather than Canadian dollars.
What other travel money options are available?
It’s often useful to have several ways to access money when you’re overseas in case of emergencies. As well as a credit card, you may want to consider some of these other travel money products:
- Foreign cash. Having cash on hand when you’re travelling overseas can come in handy if you’re spending somewhere that doesn’t accept cards (such as transport tickets, taxis or at markets). Using cash is also another easy way to avoid foreign transaction fees.
- Debit card. Your everyday Mastercard or Visa debit card can also be used overseas, wherever these brands are accepted. Just keep in mind that currency conversion fees may also apply for a debit card and be aware of the potential complications if your account’s security is compromised while you’re away.
- Prepaid travel money cards. You can also use a prepaid travel card, which you can load with money and spend the funds in multiple supported currencies. When you move currency from Canadian dollars to a supported foreign currency, it’s also locked in at the current exchange rate, which could help you avoid fluctuating rates and manage your budget better while you’re travelling. When you spend in a supported foreign currency, you can avoid currency conversion fees with these cards.
If you’re a frequent traveller or regularly shop online with international retailers, a credit card that has 0% foreign transaction fees could help you keep your costs to a minimum. Just remember to compare a range of options and look at the other features available so that you can find a credit card that really suits your needs.