Foreign transaction fees USD and CAD

No Foreign Transaction Fee Credit Cards vs. US Dollar Credit Cards: What's the Difference?

Last updated on July 18, 2018 Views: 7107 Comments: 0

Using the right credit cards at the right time can save Canadians a bundle via cash back, fee waivers, and other benefits. Those who travel frequently outside of Canada, or those who make purchases from international websites, should take a look at two card types in particular: US dollar credit cards and no foreign transaction fee cards. Some Canadians use the two terms interchangeably, but they are actually quite different and are designed for two different types of cardholders.

What’s the Difference?

A foreign transaction fee gets charged every time a credit card is swiped in a foreign country or for a purchase in foreign currency. The typical fee can run anywhere between 2% and 3%. This doesn’t sound like a lot, but it can add up to a major expense for people who are making regular purchases overseas. Foreign transaction fees credit cards are usually associated with travel purchases, but they can also apply to spending online via websites based in foreign countries, as not all international sites offer the option of purchasing in CAD. Fortunately, there are some great credit cards available to Canadians that either waive or counterbalance these foreign transaction fees.

Alternatively, a US dollar credit card is one in which all transactions are executed in US dollars. This type of card is a smart choice for many Canadians because it avoids the costly conversion fees that are tacked onto purchases made in USD. Instead, everything from the price of the item to paying your bill is done in US dollars.

Which Is Right for You?

Both no foreign transaction fee credit cards and US dollar credit cards offer Canadian consumers considerable, albeit different benefits. Deciding which to use is a mere matter of taking a look at your travel and international spending practices. Here are our basic guidelines:

Why Choose US Dollar Credit Cards

Anyone who regularly travels to the US, whether for business or pleasure, will gain the most from this type of card. Canadians who spend long periods of time in the States will benefit even more. For example, snowbirds that migrate south for the winter might stay several months at a time in the States and make all their purchases in USD. Each time they go out to eat, buy groceries, fill up on gas, go to the pharmacy, or use their cards for any other reason, they will be charged conversion fees with a normal Canadian credit card. This eats up 2-3% of their budget. With a US dollar credit card like Scotia or BMO, these fees are avoided, savings hundreds if not thousands of dollars each year.

Additionally, anyone who routinely shops online at sites that don’t support CAD will save money with a US dollar credit card. Imagine a Canadian business that regularly buys their supplies from the States. 3% of a $20,000 order is going to be charged $600 just for the transaction! Save this unnecessary overhead by purchasing in USD from the get-go.

Of course, this type of card comes with an obvious obstacle for most Canadians: the bill needs to be paid in USD in order to fully avoid foreign transaction fees. That means you have to have a regular stream of US dollars in order to pay off this credit card, or the benefits are lost. If you have a US bank account, this will be the right card for you. If not, you should consider other options.

Why Choose No Foreign Transaction Fee Cards

Alternatively, people who are travelling to another foreign country can make the most of their trip by opting for a card that either offsets foreign transaction fees with accelerated cash back or waives the fees altogether. The Rogers Platinum Mastercard charges a 2.5% foreign transaction fee, but offsets this charge by giving cardholders 4% cash back on all purchases made in a foreign currency. That means the net cash back is actually 1.5% after the fees are paid.

The Home Trust Preferred Visa card waives the foreign transaction fee entirely. With the demise of Chase’s Amazon and Marriott cards, it’s now one of the few cards in Canada that has absolutely no foreign trans. fees.

If you’re trying to decide between a no foreign transaction fee credit card vs. US dollar credit card, you should essentially ask two questions:

  1. ‘Do I already have or can I easily open a US bank account?’ and
  2. ‘Are most of my international purchases made in USD, or in multiple foreign currencies?’

Once you figure out your answers you can apply for the card type that’s the best fit for you and start saving money immediately.

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