How To Avoid Credit Card Foreign Transaction Fees When Travelling Abroad
Did you know most credit cards charge a foreign transaction fee? You may have not noticed it since your statement automatically factors in that fee when posting charges to your account, but trust us, you’re getting dinged every time.
Here’s how it works: When you make a purchase in a foreign currency, it’s converted into Canadian or U.S. dollars (depending on the card) before being charged to your card, with a foreign transaction fee charged on top of that — most Canadian credit cards charge 2.5%.
Paying 2.5% may not sound like a big deal, but those fees add up. The good news is, there are a few ways to avoid those foreign transaction fees without much additional work on your end.
Find a card with no foreign transaction fees
There used to be quite a few credit cards with no foreign transaction fees, but now that CHASE has pulled out of the country, Canadians are left with limited choices in 2018. Currently, there are two no foreign transaction fee credit cards in Canada you can apply for: the Home Trust Preferred Visa and the Scotiabank Passport Visa Infinite Card.
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Home Trust Preferred Visa - Card details
- No annual fee
- No foreign exchange fee charged on purchases abroad
- Earn 1% cash back on all purchases, with no limit on the amount you can earn
With no annual fee and no foreign exchange fee, the Home Trust Preferred Visa card is a great choice for occasional travellers. With the additional benefits of 1% cash-back on all spending with no limits and a free Roadside Assist membership, you can’t go wrong. The downside is that this card not available to residents of Quebec. Its is also worth noting that card is limited to 10 authorized transactions per day.
Scotiabank Passport™ Visa Infinite* - Card details
- Earn up to 30,000 bonus Scene+ points in your first year (that’s up to $300 towards travel).1 Plus, no annual fee in the first year, including on supplementary cards. Offer expires February 28, 2022.
- No foreign exchange fee charged on purchases abroad
- Earn 2 points per dollar on groceries, restaurants, entertainment, and travel
- Earn 1 point per dollar on all other eligible purchases
- Enjoy complimentary Priority Pass™ membership, plus 6 free visits per year from the date of enrolment.
- Annual fee: $139
The Scotiabank Passport Visa Infinite is a more robust offering, perfect for those that travel regularly.
Withdraw cash once you arrive
If you need cash, using local ATMs is almost the cheapest option. You’ll still pay the 2.5% foreign transaction fee, but that’s usually still cheaper than exchanging your money at a bank back home or at a currency exchange office.
Keep in mind that any ATM you use may have a one-time withdrawal fee. If that’s the case, max out your daily limit when getting cash so you can reduce the amount of times you pay that fee. Alternatively, some banks will waive that one-time fee if you’re using an ATM that’s part of your bank’s network or if you have a premium chequing account with your bank.
Use a credit card that offsets (or partially offsets) the fee
Paying that foreign transaction fee hurts, but there are a few credit cards that can offset (or partially offset) those fees based on the type of purchase you’re making.
Rewards credit cards offer a set rewards amount which is based on merchant categories such as groceries, gas, and restaurants. Each network (Visa, MasterCard, American Express, etc.) has different category codes, as well as rules and exceptions by region. But, the idea is that you can still earn your multipliers even when you’re abroad. Here are some of the best credit cards that will help you reduce your foreign transaction fees while travelling:
Scotiabank Gold American Express
Scotiabank®* Gold American Express® - Card details
- Annual fee: $99
- Earn 4 Scotia Rewards points per dollar on gas, groceries, entertainment, and restaurants; earn 1 point per dollar on all other purchases
- Discounted membership to Priority Pass airport lounges
- Earn up to 40,000 bonus Scene+ points in your first year (that’s up to $400 towards travel). Plus, no annual fee in the first year, including on supplementary cards and get a 0.00% introductory interest rate on balance transfers for the first 6 month. Offer ends Jan 1, 2022.
- Complimentary concierge services
The Scotiabank Gold American Express gives you a 4% return on gas, groceries, entertainment, and restaurants so you end up ahead by 1.5% when you factor in the 2.5% conversion fee. You earn 1% on all other purchases which will help offset that conversion fee.
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