When you make a purchase in a foreign currency on your credit card, you’re typically charged the converted amount in Canadian dollars plus a 2.5% foreign exchange (FX) fee. If you return that purchase, you’ll receive a refund for the purchase amount at the current exchange rate but you won’t receive an FX credit adjustment for that 2.5% fee.
Luckily, there are several excellent no-FX fee credit cards that can save travellers and foreign spenders a lot of money. However, returning items you've purchased from international vendors and/or locations can be a bit tricky when it comes to FX fees and the like.
Here, we’re covering how returns work when you’re dealing with credit cards, exchange rates, and foreign transaction fees.
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How credit card foreign exchange fees work
Each time you make a purchase with your credit card in a foreign currency, your statement will show the original amount, the exchange rate, and the total cost in Canadian dollars. The exchange rate varies daily and is based on the network’s posted rate.
You’ll also see a foreign exchange fee, which is around 2.5% of the total transaction for most credit cards in Canada. It might seem like a small amount, but if you’re travelling abroad and making several purchases a day, those fees can add up.
What happens when you return a purchase in a foreign currency?
If you return a foreign purchase made with cash, you’ll get back whatever you paid in the local currency. It’s a little more complicated when there’s a credit card involved.
- You’ll receive a refund for the original purchase amount in the local currency, converted into Canadian dollars at the current exchange rate. This means you might receive back less than you originally paid in CAD.
- You won’t receive a refund for the 2.5% fee you paid.
Let’s look at an example:
Say you bought a sweater for $100 USD at an exchange rate of $1.31, plus you had to pay a 2.5% foreign exchange fee. In total, you paid $134.28 CAD on your credit card.
You change your mind and return the sweater a few days later when the exchange rate is $1.30. You receive $100 USD back, which posts to your credit card statement as a refund of $130 CAD.
You don’t receive a refund for the initial currency exchange fee, plus you lose a bit on the exchange rate change. All things considered, you’re out $4.28 CAD.
Avoid currency exchange fees with the right credit card
If you frequently travel or make purchases in a foreign currency, getting a credit card with no foreign exchange fees might make sense. Here are a few of our favourites:
| Credit card | Current offer | Earn rate | Annual fee and income requirements | Apply now |
|---|---|---|---|---|
| Scotiabank Passport Visa Infinite Card |  $100 GeniusCash + 35,000 bonus points (terms) | Up to 3 points per $1 spent | * $150 * $60K personal or $100K household | Apply now |
| Scotiabank Gold American Express Card | $100 GeniusCash + Up to 50,000 bonus points, first year free (terms) | Up to 6 points per $1 spent | * $120 * No income requirements | Apply now |
| Home Trust Preferred Visa | None | 1% cash back on eligible purchases | * $0 * No income requirements | Apply now |
| KOHO Extra Mastercard | $100 GeniusCash + $20 after the first purchase | Up to 1.5% cash back | * $144 * No income requirements | Apply now |
Scotiabank Passport Visa Infinite
One of our top credit cards with no FX fees, the
GC: $100
Scotiabank Gold American Express
The
×1 Award winner GC: $100
1x Award winner Home Trust Preferred Visa
If you’re looking for a credit card with no annual fee to bring along on your travels, the
KOHO Extra Mastercard
While not a typical credit card, the
To use the KOHO prepaid card, simply load Canadian cash on the card and make your purchases. You won’t pay an FX fee, you’ll earn up to 1.5% cash back on your spending, and the money sitting in your account will work for you, earning up to 5% interest.
FAQ
Can you refund foreign transaction fees?
You can return a purchase in foreign currency but you won’t receive a refund on the foreign transaction fee. The bank or credit card issuer keeps that amount, so you’ll see it deducted from any refund you get.
How does currency affect returns?
When your return is processed, the merchant will reverse the charge at the current exchange rate, so you might get a little more or less back. If you paid in cash, you’ll receive exactly what you paid in the local currency.
My refund was less than I paid for the item – how come?
It’s not uncommon for a refund amount to be different from the original purchase amount when you’re dealing with a foreign currency. The exchange rate might have risen or dropped since you bought the item – and you won’t get any foreign transaction fee you paid back.
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