The real impact of foreign exchange transaction fees

by Barry Choi July 19, 2018 / No Comments

When it comes to travel, we can all agree that paying fees is no fun right? Over the years, airlines have started to increase their fees as a way to offset their expenses. It’s not surprising these days to pay an additional $30 for seat selection or $25 to check a bag each way. A family of four could easily spend an additional $440 before they even get on the plane!

Airline fees might be hard to avoid, but one thing we do have control over are foreign transaction fees. These fees are easy to miss since they’re baked right into the exchange rate that you see on your credit card statement. Many people don’t even realize that this fee exists, but unless you’re using a credit card without foreign exchange fees, I assure you, you’re paying a premium every time you make a purchase in a foreign currency.

How much foreign exchange fees are costing you

Obviously, the amount you spend in foreign purchases will affect how much you pay in foreign exchange fees. Someone who travels regularly abroad will end up paying much more in fees compared to someone who only travels within Canada. But let’s take a look at what a typical trip for a family of four may cost.

  • $3,000 – Flights
  • $2,200 – Accommodations
  • $1,750 – Meals
  • $500 – Attractions
  • $100 – Local transportation
  • $500 Shopping

Of the above, flights and accommodations will likely be paid in Canadians dollars in advance, but the remaining $2,850 could easily be spent in a foreign currency.

If your credit card charges foreign exchange fees, then you’re losing $71.25 in fees every time. That doesn’t sound like a lot, but it could easily pay for a nice meal or for some of your attraction tickets.

Also, think about the long term, after ten years, you would have paid $712.50 in fees. That’s enough for a flight to Europe.

What about purchases that go beyond travel?

Besides the money you spend overseas, many Canadians may end up charging quite a few things to their credit cards in US dollars.

Quite often I find myself on eBay or etsy and the only option I have is to pay in US dollars. Again, for small transactions it may not seem like a lot, but those fees do add up.

Some Canadians also do quite a bit of cross-border shopping. Again, you’d end up paying in US dollars. Unless you have cash handy, you’re going to end up paying those foreign exchange fees again.

Let’s say you’re spending $500 a year in USD. Well that’s another $12.50 in fees you’re paying for a total of $83.75 when you factor in estimated travel expenses.

I’d rather keep that money in my pocket, wouldn’t you?

To avoid paying foreign transaction fees, all you need to do is apply for a credit card without foreign transaction fees.

The best credit cards without foreign transaction fees

Home Trust Preferred Visa – With no annual fee and no foreign transaction fees, the Home Trust Preferred Visa has become a popular choice for travellers. The card also comes with benefits such 1% cashback with no limits on all purchases, roadside assistance, Visa auto rental collision/loss damage insurance, and purchase protection. The only downside is that the card has a daily limit of 10 transactions. If you tend to make a lot of purchases, you may want to consider the following card instead.

Scotiabank Passport Visa Infinite Card – Although the Scotiabank Passport Visa Infinite Card has an annual fee of $139, there’s currently a signup bonus of 25,000 points ($250 value) when you charge $1,000 to your card in the first 3 months. You’ll also get a Priority Pass membership with six free annual airport lounge visits which has a value of more than $250 USD. Add in the included comprehensive travel insurance and this card is a winner.