What are the Best Credit Cards for Currency Exchange?
If you’re traveling or using your credit card to make purchases in foreign currencies, you’re getting hit with a 2.5% fee every time you make a foreign currency purchase on your credit card! Here’s how to avoid that fee.
When making purchases in a foreign currency, paying in cash is one of the most common options used by Canadians but it’s often not a convenient option. When travelling I can only carry so much cash on me before I start to feel paranoid about losing it, or worse being robbed of it at knife-point, or even worse…
Setting my paranoia aside, I’m very careful about keeping track of and concealing my cash while traveling, so as unlikely a scenario as this might be for me I’d just rather not have to worry about carrying a large amount. Also, with global online commerce spreading like wildfire and the growing number of deals to be had from foreign merchants selling their wares in foreign currencies, paying cash is not even an option. So what’s the next best option? Plastic, your trusty credit card!
Credit cards are a convenient way to pay for purchases both online and while travelling outside Canada since they’re accepted almost anywhere, but what many people don’t realize is that most Canadian credit card issuers (which are mainly banks) tack on a 2.5% fee to every foreign currency transaction. They conveniently convert all your purchases made in foreign currencies to Canadian Dollars at the exchange rate set by Visa or MasterCard (depending on whose card you’re using), but what is not commonly known is that they are blending an additional 2.5% fee on top of that into the exchange rate they charge to you. If you charged just the equivalent of CAD $2,000 in any foreign currency to your credit card, odds are you just got hit up for an extra $50 by your credit card issuer (likely a bank).
How to avoid the 2.5% foreign currency exchange fee when paying by credit card?
Chase Canada offers a handful of no foreign transaction fee credit cards for you to choose from, now which Chase card is best for you depends on which rewards will be most valuable to you. I like to carry both a Visa and MasterCard option in my wallet to ensure I’ve got the bases covered in case a merchant only accepts one or the other, so I’ve listed the one of each that I keep in my own wallet. I’m a big fan of no-fee credit cards so that’s definitely influenced my choices, but which one is best for you may differ so be sure to review the options yourself.
My Top Pick: Chase Amazon.ca Visa
- Annual Fee: $0
- Approval Bonus: $20 credit to spend on amazon.ca
- Rewards: 2 points for every $1 spent on amazon.ca and 1 point for every $1 spent everywhere else
With the Chase Amazon.ca Visa, when you reach 2,000 points they are automatically redeemed for a $20 statement credit (I like that this requires no action on my part so that there are no forgotten points left behind). This essentially translates to 2% cash back on purchases on amazon.ca and 1% cash back on purchases made everywhere else. I’m a big fan of cash back credit cards since you’re not limited in what you redeem your reward points for (e.g. only flights or only hotels etc…) and while this is not the best cash back offer among all the credit cards out there, when looking to save that 2.5% fee on foreign currency purchases this card is my top pick.
Backup Pick: Chase Sears Financial MasterCard/Scotiabank Momentum Visa
- Annual Fee: $0
- Approval Bonus: $30 worth of Sears Club Points
- Rewards: 2 points for every $1 spent at Sears Canada stores at Sears.ca and 1 point for every $1 spent elsewhere
1,000 Sears Club Points are worth $10, so similar to the Amazon.ca Visa, you get 2% back for purchases made at Sears and 1% for purchases made everywhere else, but the big catch here is that you can only redeem at Sears. This significantly limits your redemption options compared to cash back, which is why I only keep this as a backup to my Amazon.ca for the rare occasion where a merchant only accepts MasterCard.
As of November 16, 2015, Scotiabank had acquired the Sears Financial MasterCard credit card portfolio from JPMorgan Chase Bank and is now under Scotiabank’s Momentum Visa Card. At this time, there have been no changes made to the fees, interests or other features previously associated with this card. However, previous and new Scotia bank momentum cardholders will not be able to enjoy the no foreign transaction fee as that is only applicable for the converted Sears financial MasterCard holders.
Other no foreign currency transaction fee cards offered by Chase Canada are the Marriott Rewards Visa that offers 5 free nights at Marriott hotels upon approval and allows you to earn Marriott Rewards Points; as well as a premium version of the Sears Financial MasterCard that offers a total of $55 worth of Sears Club Points by the time you’ve completed your first purchase and also allows you to earn Sears Club Points at a higher rate than the basic version. However, the big con of both of these cards in my view is that they charge annual fees of $120 and $39 respectively. The Marriott card does waive the fee for the first year so that makes it a worthy option for the bonus rewards alone, just remember to cancel before your first year is up if you don’t want to be paying a $120 fee every year.
Alternative Pick: Rogers Platinum MasterCard
- 1.75% cash back on all eligible purchases
- No foreign transaction fee
- Welcome bonus of $35 in cash back
- No annual fee as long you’re a Rogers customer and have one of your Rogers billed paid through pre-authorized payment
The Rogers Platinum MasterCard is also a good alternative especially if you’re already a rogers customer currently subscribing to any Rogers service. In addition to no foreign transaction fees, the card also provides a 1.75% cash back on all eligible purchases. You get 10,000 Rogers Platinum Rewards welcome points which provides a $35 cash back. The cash back can be applied as a statement credit or as a credit to any of your monthly Rogers and or FIDO bill. On top of that, there is no annual fee after the first year as long as you have setup a pre-authorized payment for any of your monthly Rogers bill.
If you’re not a Rogers customer the card may still be beneficial to you. There is no annual fee for the first year and since the annual fee is only $29, the $35 cash back you get for signing up more than covers it anyways. The fact that you can also use the cash back as a credit on your statement also makes it worthwhile.
Credit cards are very convenient, but cash remains a required option for places that don’t accept them. On property purchases, tuition payments and investments; a credit card is just not an option. Banks charge huge exchange fees, so using a currency exchange service will ensure you are getting a better currency exchange rate. When you’re exchanging Canadian dollars to US dollars, remember to check in with Knightsbridge Foreign Exchange to an exchange rate that is better than what the banks offer and save even more money!
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