*Please note: as of 09/11/2017 it appears that Chase is no longer accepting applications for the Marriott Rewards Visa. We’ve sent an inquiry to Chase in an attempt to confirm or correct our presumption. We will continue to update this article as we learn more, but for now we can only recommend the Rogers Platinum Mastercard and the Home Trust Preferred Visa for avoiding foreign transaction fees.
Many Canadians are in for a nasty surprise after a trip abroad. The bad news is most Canadian credit card companies add a 2.5%-3% foreign transaction fee to each purchase that cardholders make outside the country. The good news is that a select few credit card issuers in Canada, like Home Trust, Rogers Mastercard
and Chase subsidize or waive the fee so that you’re not charged at all.
Unlike the United States, where credit card issuers are increasingly abandoning foreign transaction fees altogether, FX fees usually represent too large a part of Canadian credit card companies’ income streams for them to walk away from. The fact is, Canadians travel out of Canada a lot more often than Americans travel out of the United States, so it’s easier for an American issuer to give up on FX fees than for a Canadian issuer.
For a quick proxy, 30% of Americans have a passport, compared to 70% of Canadians, a good indication of foreign travel. Moreover, Canadian banks make a healthy profit from foreign exchange services from their retail customers, where they charge a 1% to 3% fx surcharge when exchanging Canadian dollars. It’s doubtful the banks will want to offer Canadians a free alternative that will cannibalize their retail fx business.
So what’s the big deal about a credit card that subsidizes foreign transaction fees? Well, the savings can be huge for some Canadian customers, especially:
- Snowbirds who winter in the south
- People who shop across the border regularly or shop online
- Those who use their credit card to make business purchases from U.S. vendors.
Think about it. If you use your credit card while wintering in the United States, you could easily rack up $10,000 – $20,000 in credit card charges. That’s $250 to $500 in foreign exchange fees going to the credit card companies. Not to mention it also wipes away the 1-2% in rewards you thought you were earning.
Not only that, using a credit card that subsidizes or waives your foreign transaction fee is actually cheaper than exchanging currencies at the bank, or at a boutique foreign exchange bureau – which routinely cost anywhere from 1%-3% to exchange your money. Debit and out-of-country ATM cash withdrawals are no better, each typically charging a foreign exchange fee of 2.5% or more.
The Rogers Platinum Mastercard now gives you 4% cash back on ALL foreign purchases and 1.75% cash back on all other purchases – the richest cash back rate for a no-fee card in Canada. On $10,000 of foreign spend that’s $400 in rewards earnings.
The other card that offers relief from foreign transaction fees is the Home Trust Preferred Visa Card, though for some reason Home Trust buries this awesome feature in their Terms and Conditions rather than explicitly advertising it, leaving it relatively unknown among Canadian consumers/travelers. Aside from being the only other 0% foreign transaction fee option, this credit card also gives Canadians 1% cash back on all purchases, without any limits on how much cashback you can earn or where you can earn it, as well as travel perks like roadside assistance, auto insurance, and liability insurance.
Other cards like the Chase
Marriott Rewards and Amazon Visa cards (neither card is offered to new applicants in Canada as of September, 2017) waive the 2.5% foreign transaction fee, but only offer 1% or less in rewards.
Rogers Mastercard’s foreign transaction subsidy is structured differently than the Home Trust Preferred Visa Card’s fee waiver, but still offers significant value. Rogers offers 4% cash back on foreign purchases, but charges 2.5% in foreign transaction fees – the net cash back rate is thus 4% cash back – 2.5% fx fee = 1.5% in net cash back.
Comparison of Canadian Credit Card Foreign Transactions Fees
Foreign Transaction Fee Offer
|Rogers Platinum Mastercard||
4% cash back on all foreign purchases
|$25 after first purchase within 90 days of receiving your card||
|Home Trust Preferred Visa||
|1% cash back||
|Tangerine MoneyBack Mastercard||2.5% fee||4% cash back 1st 90 days in 3 categories||$0|
|Scotiabank Gold Amex Card||
$99 Waived 1st Yr for applying by October 31
|RBC Avion Visa Infinite||2.5% fee||15,000||$120|
|BMO Rewards World Elite||2.5% fee||20,000||
By the way, for those who think you’re avoiding foreign transaction fees by having a U.S. Dollar credit card, unless you earn American dollars, you’re not avoiding anything. Ultimately, you’ll have to pay your U.S. Dollar credit card bill in U.S. dollars, and you’ll have to convert your Canadian dollars to U.S. dollars at the bank to do so. At that point the bank will charge you its 1%-3% foreign exchange surcharge.
Hopefully more Canadian credit card issuers, that don’t have a large share of their spend in foreign purchases, or an established foreign exchange business, will step up to the plate and waive their foreign transaction fees. Perhaps some of the more niche issuers like President’s Choice, WalMart, or Canadian Tire can shake things up a little bit the way Rogers and Home Trust have. But as of right now though, Rogers and Home Trust are the only games in town, and they’re offering Canadians a SUPERLATIVE opportunity, just not enough of us know about it.