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Currency exchange rate fees can really start to add up over time.

So if you’ve ever made a purchase in a foreign currency using your credit card, keep an eye out for the pretty hefty fee you’ll pay for the privilege.

With a little bit of effort, however, you can avoid paying most (or all) of this fee. Here’s how.

Currency conversion vs. foreign transaction fees

There are actually 2 parts involved with foreign currency charges to your credit card. These are:

  • the currency conversion itself, and
  • the foreign transaction fee.

Currency conversion

As we all know, different country’s currencies are worth different amounts, and these differences change every day.

For example, on business days between August 20 and August 26, 2020, the Bank of Canada U.S. dollar exchange rate fluctuated as follows:

Day U.S. Dollar exchange rate
August 20 1.3195
August 21 1.3205
August 24 1.3207
August 25 1.3194
August 26 1.3155

And banks will have their own exchange rates that are almost always slightly higher than the Bank of Canada rate.

For example, on August 25, 2020, these were the exchange rates according to the various exchange rate calculators we found:

Bank U.S. Dollar exchange rate
(Aug 25, 2020)
Bank of Canada 1.3194
RBC 1.3437
TD 1.3505
Scotiabank 1.3475
National Bank 1.3540
HSBC 1.3445
BMO 1.3568

So, if you went to RBC and used Canadian dollars to purchase $1,000 U.S. Dollars, it would cost you $1,343.70. But if you went to National Bank instead, it would’ve been $1,354.

These rates apply to non-cash transactions, which include cheques, drafts, and wire transfers.

Foreign transaction fees

But it’s a slightly different story if you’re spending foreign currencies on your credit card. Your purchase will be subject to the exchange rate of your credit card’s network (Visa, Mastercard, or Amex) as discussed below.

And typically, Canadian credit cards charge a 2.5% foreign transaction fee for purchases made in currencies other than CAD to cover processing costs and other related expenses. This is sometimes referred to as an “FX fee” (where FX is short for foreign exchange).

This is charged on top of the exchange rate, so your US$1,000 purchase would cost you $1,357.31 if you have a Visa credit card:

($1,000 x 1.3242 exchange rate) x 2.5% foreign exchange fee = $1,357.31

The good news is some credit cards waive this fee. If you’re not sure whether your credit card has an FX fee, the easiest way to find out is to check your credit card agreement. It will usually look something like this:

Foreign Currency Conversion example.

What credit cards charge for currency exchange rate fees and foreign transaction fees

So, what do credit cards charge when you make a credit card purchase in a foreign currency? Let’s look at a U.S. dollar purchase as an example.

Numbers below were current at the time of writing, and are meant as illustration only. For more up to date information, please see your bank or credit card website.

Issuer Exchange rate CAD cost per US$1,000 (0% bank fee) CAD cost per US$1,000 (+ 2.5% FTF) Total fees charged over BOC rate
Bank of Canada 1.3194 $1,319.40 N/A N/A
Visa 1.3242 $1,324.20 $1,357.30 $37.91
Mastercard 1.3239 $1,323.90 $1,357.00 $37.60
American Express N/A N/A N/A N/A

What are Visa’s exchange rate fees?

Like most financial institutions, Visa’s exchange rates change daily.

For the current rates, visit the Visa Travel Services currency exchange calculator. There you’ll be able to get the current exchange rates for most major currencies.

As of this writing, here’s what Visa was charging:

U.S. Dollars Rate + fee Canadian Dollars Difference Difference from BOC rate
$1,000 1.3242 + 2.5% $1,357.30 $357.31 $37.90
$1,000 1.3242 + 0% $1,324.20 $324.20 $4.80
2.5% FX fee = $33.10 CAD

To start, Visa’s exchange rate is 0.0048 higher than the Bank of Canada, which turns into an additional $4.80 per US$1,000.

And if your credit card has a foreign transaction fee, that’s charged on the Canadian dollars after they’ve been converted from USD. So, if your Visa credit card has a 2.5% foreign transaction fee, that’s an additional $33.10 you’ll be paying for every US$1,000 you put on your card.

What are Mastercard’s exchange rate fees?

The Mastercard exchange rate and fees are generally pretty close to Visa’s on any given day. Here’s what they were when we were writing this article:

U.S. Dollars Rate + Fee Canadian Dollars Difference Difference from BOC rate
$1,000 1.3239 + 2.5% $1,357.00 $357.00 $37.60
$1,000 1.3239 + 0% $1,323.90 $323.90 $4.50
2.5% FX fee = $33.10 CAD

Similarly, Mastercard’s exchange rate is 0.0045 higher than the Bank of Canada, which is an extra $4.50 per US$1,000.

And, just like Visa, if your Mastercard has a foreign transaction fee, that’s charged on the CAD after it has been converted from USD.

With the current number, Mastercard’s added 2.5% foreign transaction fee ends up being the same as Visa’s at $33.10 for every US$1,000 you charge to your credit card.

These numbers will change from day to day, of course. For the most up to date exchange rates, see the Mastercard currency converter calculator.

What are American Express’ exchange rate fees?

Unfortunately, American Express does not publish their exchange rates anywhere that we were able to find, nor did they provide any sort of calculator. From what we’ve seen in older reports, American Express numbers were usually very similar to other credit card issuers in Canada.

Canadian banks currency exchange rates and fees

So, how do the major Canadian banks measure up in terms of their exchange rates?

Bank Exchange rate CAD per US$1,000 Difference in CAD Difference over BOC Effective mark up
Bank of Canada 1.3194 $1,319.40 $319.40
RBC 1.3437 $1,343.70 $343.70 $24.30 1.84%
TD 1.3505 $1,350.50 $350.50 $31.10 2.36%
Scotiabank 1.3475 $1,347.50 $347.50 $28.10 2.13%
National Bank 1.3540 $1,354.00 $354.00 $34.60 2.62%
HSBC 1.3445 $1,344.50 $344.59 $25.10 1.90%
BMO 1.3568 $1,356.80 $356.80 $37.40 2.83%

In the end, with the difference in currency conversion rates and foreign transaction fees, credit cards are charging roughly what the major Canadian banks are charging for currency conversions.

But…you can actually avoid most or all of these fees if you’re clever.

Those hidden fees can add up quick. Here’s what you need to know when making returns.

How Foreign Currency Exchange Works When Returning Your Purchases

How to avoid currency exchange rate and foreign transaction fees

If you make a lot of purchases in foreign currencies, you’re probably getting pretty tired of being dinged for all these currency exchange and transaction fees. They add up fast and just make it even more painful when your credit card bills come in.

But with a little effort, you can avoid most or all of these fees, and save yourself a bundle in the process.

There are 2 strategies here:

Here’s what you need to know.

Credit cards with no foreign transaction fees

While the majority of Canadian credit cards have a 2.5% foreign transaction fee, there are some that waive this fee, saving you a lot of money on those transactions.

And these waive that fee on transactions for all currencies, not just those in U.S. dollars. But you’ll still pay the base currency conversion fee.

Here’s a list of some of the best credit cards with no foreign exchange fees.

Credit card Welcome bonus Annual fee Rewards Apply now
Brim World Elite Mastercard Up to $500 in bonus rewards when you make your first purchases at select merchants (terms) $199, first year free * Earn 2 points for every $1 spent (up to $25,000 spent annually)
* Earn 1 point for every other $1 spent
Apply now
HSBC World Elite® Mastercard® Earn 100,000 bonus points after you make your first purchase and spend $5,000 in the first 6 months (terms) $149, annual fee rebate for the first year * Earn 6 points for every $1 spent on travel
* Earn 3 points for every other $1 spent
Apply now
Scotiabank Gold American Express® Card 25,000 points when you spend $1,000 in the first 3 months (terms) $120 * Earn 5 points for every $1 spent on groceries, restaurants, and entertainment
* Earn 3 points for every $1 spent on gas, daily transit, and streaming services
* Earn 1 point for every other $1 spent
Apply now
KOHO Premium Prepaid Visa Earn an extra 1% cash back for the first 90 days if you sign up through us with the code “CCGBONUS
(terms)
$84 * Earn 2% cash back on gas, groceries, restaurants, and transit purchases
* Earn 0.5% cash back on all other purchases
Apply now
Home Trust Preferred Visa None $0 * Earn 1% cash back on all purchases Apply now

Best overall credit card for foreign transaction fees

The is currently our top-rated credit card with 0% foreign transaction fees.

You can earn up to $500 in first-time bonuses by shopping with participating retailers, and you’ll earn:

  • 2 Brim Rewards points for every $1 spent (up to $25,000 spent annually), and
  • 1 point for every other $1 spent.

Since your Brim Rewards can be used as statement credits at a value of 1 cent per point, that makes your points as good as cash.

You’ll also get one of the best insurance packages of any credit card in Canada, with 15 types of coverage.

Premium travel credit card with no FX fees

Not only does the waive the 2.5% foreign transaction fee, with a welcome bonus worth up to 100,000 HSBC Rewards points, it gives you a head start on earning travel rewards.

You’ll also earn:

  • 6 points for every $1 spent on travel purchases, and
  • 3 points for every $1 spent on all other purchases.

This travel credit card comes with a host of other great perks, including 11 types of included insurance coverage.

Flexible rewards and no FX fees

Prefer an Amex card? The gets you flexible travel rewards, and saves you that pesky 2.5% foreign transaction fee.

You’ll start off with 25,000 bonus Scotia Rewards (a $250 value), after which you’ll earn:

  • 5 points for every $1 spent on groceries, restaurants, and entertainment,
  • 3 points for every $1 spent on gas, daily transit, and
  • 1 point for every other $1 spent.

With 12 types of included travel insurance and purchase protection, this is a solid choice for a credit card to use while travelling.

Premium prepaid Visa with no FX fees

In addition to not charging any foreign transaction fees, the earns:

  • 2% cash back on gas, groceries, restaurants, and transit, and
  • 0.5% cash back on all other purchases.

There’s not a lot of perks besides, but if you do a lot of online shopping in foriegn currencies, the FX fee savings may be worth the $84 annual fee.

No annual fee, no FX fees, and 1% cash back

If you prefer no fee credit cards, the will also save you the 2.5% foreign transaction fees you’d normally be charged.

And while there’s no welcome bonus, you’ll earn 1% cash back on all purchases without having to worry about any caps or categories. Not bad for a no fee card.

U.S. dollar credit cards and U.S. dollar bank accounts

If you make a lot of purchases in U.S. dollars, there’s a way you can avoid paying currency conversion fees entirely, simply by never having the currency actually converted.

This is only effective for purchases made in U.S. dollars, not any other foreign currency. But, if you travel to or shop in the U.S. a lot, you can save some serious cash this way.

There are 2 things you’ll need:

The idea is that you use your U.S. dollar credit card to make U.S. dollar purchases, and then use the money in your U.S. bank account to pay that credit card, thus avoiding currency conversions entirely.

That said, however, you will pay currency conversion fees when you turn Canadian dollars into U.S. dollars to deposit into the account, which reduces the potential cost savings of this method.

On the other hand, if you have a source of income that is in U.S. dollars, depositing that into your U.S. dollar bank account and using it to pay off your credit card will let you avoid currency conversions entirely.

It’s a bit convoluted, but if you have a source of U.S. dollars, this is a way to avoid paying these fees when making purchases in U.S. dollars.

Most banks have U.S. dollar bank accounts available for Canadians. And here are a couple of U.S. dollar credit cards you might consider.

Credit card Special features Annual fee Rewards Apply now
RBC U.S. Dollar Visa Gold Earn rewards on your U.S. purchases US$65 * Earn 1 point for every U.S. $1 spent Apply now
BMO® U.S. Dollar Mastercard®* Spend US$1,000 in a year and your annual fee will be rebated US$35 None Apply now

Earn rewards while you save on fees

If you make lots of purchases in U.S. dollars, the will help you avoid those currency conversion costs entirely.

In addition to having 8 types of included travel insurance and purchase protection, this credit card will let you earn flexible RBC Rewards, at a rate of 1 point for every U.S. $1 spent.

U.S. dollar Mastercard that will help you save

While this is a pretty simple card without a lot of added perks, the will help you save on those pesky currency exchange and foreign transaction fees.

Also, if you spent more than $1,000 USD on the card per year, your annual fee will be rebated. It’s a little thing, but a way to save even more.

Making a lot of purchases in US dollars? Avoid those extra fees.

Canadian credit cards with no foreign transaction fee

Bottom line

So, there you have it, a couple of strategies to save on foreign transaction and currency exchange fees.

Do you travel or do a lot of online shopping?

Do you have a different strategy for saving on these fees?

Let us know in the comments.

FAQ

What’s the difference between a currency exchange rate fee and foreign transaction fee?

The amount you’re charged when making a foreign transaction on your credit card actually has 2 parts: the currency conversion cost itself, plus the foreign transaction fee. The currency conversion cost is based on whatever the current exchange rate is for your credit card network, and the foreign transaction fee, if there is one, is a 2.5% charge on top of that.

How can I avoid paying foreign transaction fees and currency exchange rate fees?

The easiest way to avoid most of the cost of making foreign purchases on your credit card is to get a credit card that waives the 2.5% foreign transaction fee. While 2.5% doesn’t seem like a lot, this is charged on every foreign currency purchase you make, and those fees can add up pretty fast.

Is Visa’s currency exchange rate better than Mastercard’s?

It’s actually really hard to tell specifically, since these rates aren’t clearly posted anywhere we could find. From what we could figure out from the different currency exchange calculators, it appears that Mastercard’s exchange rate may be a tiny bit lower than Visa’s, but these change from day to day. Either way, they’re going to be very close.

What is Visa’s currency exchange rate?

Visa’s currency exchange rate changes daily. For the most up to date information, you should check their currency exchange calculator.