Travel Tip: Avoid Foreign Transaction Fees On Your Canadian Credit Card
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 cards in Canada, like the Rogers Platinum Mastercard and Home Trust Preferred Visa, make up for 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 comparison: 30% of Americans have a passport, compared to 70% of Canadians.
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.
Aside from 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 3% cashback rewards on all purchases in a foreign currency and 1.25% cashback rewards on all other purchases – one of the richest flat cashback rewards rates for a no annual fee card in Canada.
Another card that offers relief from foreign transaction fees is the Home Trust Preferred Visa Card. Aside from waiving the 0% foreign transaction fee option, this credit card also gives Canadians 1% cash back on all purchases, without any limits on how much cash back you can earn or where you can earn it, as well as travel perks like roadside assistance, auto insurance, and liability insurance.
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 3% cashback rewards on purchases in a foreign currency, but charges 2.5% in foreign transaction fees – the net cashback rewards rate is thus 3% – 2.5% FX fee = 0.5% in net cashback rewards. For this reason we typically recommend the Rogers card over the Home Trust to those who travel outside of Canada frequently.
Comparison of Canadian Credit Card Foreign Transactions Fees
|Credit Card||Foreign Transaction Fee Offer||Notable Benefits||Annual Fee||Apply for Card|
|Rogers®Platinum Mastercard®||2.5% fee||3% cash back on ALL purchases in a foreign currency subsidizes the 2.5% foreign transaction fee||$0||Apply Now|
|Home Trust Preferred Visa||0% fee||1% cash back||$0||Apply Now|
|Tangerine Money-Back Credit Card||2.5% fee||2% cash back on 2-3 purchase categories||$0||Apply Now|
|Scotiabank Gold American Express Card||2.5% fee||15,000 bonus points after spending $1000 in first 3 months||$99||Apply Now|
|RBC Visa Infinite Avion||2.5% fee||25,000 Welcome Points upon approval||$120|
First Year Free
|BMO Rewards World Elite Mastercard||2.5% fee||2 BMO Rewards Points per $1 spent||$150||Apply Now|
By the way, for those who think they’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 two of the only games in town, and they’re offering Canadians a SUPERLATIVE opportunity. Just not enough of us know about it.