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What are foreign transaction fees and what do they mean for you?
The fee (typically 2.5%) charged by many credit cards for purchases you make in a foreign currency might not seem like much, but it can add up quickly. To be clear: The fee is applied to every purchase made in a currency that’s not Canadian dollars—even when you shop online. For perspective, that’s $25 in transaction fees for every $1,000 you spend on your card, and you have to pay the exchange rate as well.
Is the foreign transaction fee affected by exchange rates?
No, the foreign transaction fee is an additional charge added on top of the current exchange rate. These exchange rates are determined by the credit card companies, using the up-to-date value of the Canadian dollar and the value of whichever currency you’re converting to.
Your fee will vary according to which credit company you choose, so it’s worth it to look into the various options if you’re a frequent traveller or you often find yourself shopping in another currency. Ultimately, choosing a card with no foreign transaction fee, or which offers a rebate on foreign transaction fees, is one of the best ways to save money when you spend in a foreign currency.
Benefits of using a no-foreign-transaction-fees credit card versus cash
As long as credit cards are widely accepted at your destination, you can avoid taking out large amounts of cash at currency exchange kiosks, airports or ATMs. Plus, purchasing with your card helps you earn rewards on every dollar spent, you get purchase protection and PIN protection, and you can easily cancel your card if it’s stolen while you’re abroad.
Our picks of the best no-foreign-transaction-fee credit cards in Canada are based on our analysis of each card’s benefits and annual fees; foreign transaction fees and how they’re handled (if rebated); and whether there are additional rewards incentives for using the card domestically and/or abroad.