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You live in Canada and use a credit card to pay for all your day-to-day transactions. But what about when you leave the country, whether to the U.S. or elsewhere in the world?
Before we reveal the best solutions for saving money on foreign currency transactions, a quick reminder of the different possibilities.
There are three main ways to pay when you’re travelling:
Let’s take a look at each method in detail, and see which techniques are best for avoiding paying more than you need to.
To find out the official rates for the various currencies, visit the Bank of Canada website. Google has also integrated a currency converter into its search engine. For example, simply enter 1 CAD in USD to obtain the current US dollar rate.
Exchanging Canadian dollars before you leave ensures that you’ll be able to pay virtually every merchant you meet… but it’s not the best technique for several reasons.
Whether in Canada or on arrival in the country you’re visiting, you can exchange your Canadian dollars for the local currency. As exchange office transactions are very costly, this is the technique we recommend least.
This is called an exchange fee or currency conversion: the exchange office sells you foreign currency in exchange for your Canadian dollars at the rate it wants. This rate will include a hidden exchange fee .
By comparing it with the market rate, you can calculate the approximate cost of the operation and how much you’ll be overcharged.
If your wallet is stolen, there’s no recourse, unlike with credit cards!
Around the world, we are increasingly moving towards digital payment solutions. In some countries, cash is no longer accepted for services as basic as cabs.
However, it’s always a good idea to have some local money on hand when you travel to a foreign country.
There are two ways to withdraw money in another country:
The debit card gives you direct access to the funds in your chequing or savings account.
Beware, however, of several aspects:
Some debit cards are more advantageous than others for withdrawals abroad.
Scotia and Tangerine are members of Global Alliance, a group of banks that allow their customers to withdraw cash free of charge from partner bank ATMs. However, you will pay the rate dictated by the bank and will not be able to save on foreign currency conversion charges.
For example, holders of a Scotia or Tangerine debit card can make free withdrawals from Bank of America ATMs in the U.S. or BNP Paribas ATMs in France.
The same warnings apply to credit cards as to debit card withdrawals.
However, other, much heavier fees will be added, as the credit card is primarily a means of payment and not a means of cash withdrawal!
Issuers will then charge a cash advance interest rate (between 20% and 30%) plus a withdrawal fee.
If you find yourself in an emergency situation and need to withdraw money from your credit card, we advise you to pay off your credit card in full immediately.
In fact, interest on cash advances starts to accrue as soon as you withdraw!
If you’re a globetrotter or a professional on the move, currency conversion fees can quickly add up when withdrawing abroad. Fortunately, there are ways to minimize these costs. Two notable options are the Wise card and the Wealthsimple prepaid Mastercard.
The Visa Debit Wise card is a reliable option for foreign currency withdrawals. Formerly known as Transferwise, Wise is an international money transfer service offering low fees on foreign currency withdrawals.
Once you have your Wise account and your Visa Debit card, you can add money to your account in Canadian dollars and make withdrawals or purchases in the currency of the country where you are located. Conversion fees are much lower than those for traditional credit cards. In France, for example, the fee is 0.53%, while in Morocco it’s 1.53%.
The Wealthsimple prepaid Mastercard is an all-in-one financial platform that combines a chequing account, a high-interest savings account, and a prepaid Mastercard. For travellers, this card is an excellent option for avoiding conversion charges on foreign currency expenses.
The Wealthsimple prepaid Mastercard does not charge any fees for ATM withdrawals or foreign currency conversions worldwide, with no monthly limits.
After withdrawals, let’s move on to payment with your debit and credit cards abroad. First, an important reminder:
Recently, in Greece, I noticed that if I chose to pay in Canadian dollars, the merchant charged me a 10% conversion fee. When I chose to pay in euros with my Scotiabank Passport® Visa Infinite* Card, these fees were reduced to 0%!
As with withdrawals, foreign currency payments with a Canadian debit card will be impacted by preset limits and various fees.
However, this may save you from having to carry cash with you from Canada, which may reassure some people. However, we prefer the alternative: payment with a Canadian credit card.
Most Canadian credit cards allow you to pay merchants directly when travelling abroad.
However, each transaction is subject to different fees:
Let’s now take the same table, with a $1,000 purchase or withdrawal with the most common Canadian credit card fees:
* Interest charges on cash advances apply from the time of withdrawal, without any grace period: to avoid them, pay off your credit card immediately!**We take it for granted that you pay your credit card balance on time to avoid interest charges on purchases.
As you can see, for $1,000 withdrawn at an ATM with a credit card, you’ll pay between $45 and $65 in fees! If you make a transaction, the fee is $35.
Four credit cards issued by major Canadian banks charge no conversion fees for foreign currency transactions:
Discover all its advantages in our article on How to maximize the travel benefits of this card.
Thanks to this advantage, you save 2.5% on each transaction.
In most cases, the exchange rate obtained will be very close to the official rate. In any case, it will be much more advantageous than that of the exchange offices.
One of a traveller’s many fears: having your money stolen! As mentioned above, if your cash is stolen, you have absolutely no recourse. By using your credit card, you eliminate this risk.
Has your credit card been compromised and money taken from your account? No problem: you’re not responsible. Upon review, your credit card issuer will refund money improperly taken from your account.
Debit cards often restrict the number of withdrawals and payments you can make. This is not the case with a credit card: the limit will be whatever the bank gives you ($5,000, $10, 000 or even more).
Finally, a very important aspect for rewards point hunters: every transaction on your credit card will earn you points!
For the Scotiabank Gold American Express Card, all purchases made abroad will earn 1 point per dollar. However, Canadian purchase categories are more attractive: up to 6 points per dollar. Points that you can then easily apply to your travel purchases.
As you can see, going abroad means anticipating your financial needs!
While the solution of paying with a credit card that doesn’t charge foreign currency conversion fees is ideal, other options shouldn’t be put aside, for all the reasons given above.
Savings this way:
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