Traveling abroad is expensive enough as it is, but with a declining Canadian dollar, it’s about to get even more so.
Aside from traveling within Canada, or a staycation, if we’re looking for a little warmth, we’ll have to head south and expose ourselves to the murky world of foreign exchange.
While many of us head to the bank or specialty currency exchange house to convert our Canadian dollars, there’s another tool that may be even cheaper, and a whole lot more convenient.
The Chase Marriott Rewards card and the Amazon Visa credit card don’t charge foreign transaction fees and the Rogers Platinum MasterCard offers 4% cash back on foreign purchases. Using one of these cards is certainly a better alternative to using any other credit card out of country, and in most cases is even cheaper than changing money at the bank, currency exchange specialist, airport or hotel.
Most Canadian credit cards charge a 2.5% foreign transaction fee, on top of the exchange rate charged by Visa or MasterCard. The exchange rate charged by Visa and MasterCard is extremely low, coming in close to the spot rate, or the rate that large multinationals would pay for sizeable transactions.
As a result, if you use a credit card without foreign transaction fees, you’re getting access to extremely competitive exchange rates, close to the spot or market rate. If you use a credit card that does charge a foreign transaction fee, you’re paying an additional 2.5% on each dollar spent. If your credit card earns you 2% cash back, you’ll be losing .5% on each transaction.
The Rogers MasterCard works a little differently but is just as effective, if not more so. It offers cardholders 4% cash back on foreign purchases. However, you still get charged the 2.5% foreign transaction fee. As a result you net 1.5% cash back, which is an exceptional rate of return on foreign purchases.
Credit cards with no foreign transaction fees also beat out the exchange rate provided by the banks and currency exchange bureaus. While banks and currency exchange bureaus don’t break out their fees from the exchange rate, depending on the sum, most will charge anywhere from 1.5% at a competitive bureau to 3% in branch. Airports and hotels can charge upwards of 10% to exchange your money.
But credit cards with no foreign transaction fees don’t just win on price, they win on convenience and safety as well. You won’t have to make a special trip to the bank, exchange cash at the exchange bureau, or carry foreign currency with you on your trip. If your credit card gets stolen you won’t be liable for any fraudulent charges, and your bank can replace it in a matter of days. Lose your cash and it’s gone for good.
If you have an out of town trip coming up, or you plan on making US dollar purchases online, you should strongly consider getting a credit card with some type of foreign transaction subsidy.
Marc Felgar is a credit card expert & online entrepreneur from Montreal, QC. He is the CEO and founder of http://www.GreedyRates.ca, which helps Canadians find the best credit card through online comparison tools, filters, credit card reviews and the latest deals and offers in the marketplace.