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Tuesday, September 27th 2022

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What is the best way to exchange money or pay for things in a different currency?

What is the best way to exchange money or pay for things in a different currency?

When you travel, you have many different options when it comes to exchanging money or paying for things in a different currency.

While there are many options, I can guarantee you one thing, any time you exchange money or pay for things in a different currency, *someone* is taking a minimum of 2.5% of every transaction from you as a foreign exchange fee.

They are taking this fee in at least one of two ways:

* an obvious fee that they tell you about upfront

and / or

* a hidden fee, by using an inflated exchange rate that is worse than today's 'real' exchange rate

Inflated exchange rates - the hidden fee

A lot of people aren't aware of the hidden fee. For example, if today's 'real' exchange rate between Canadian and U.S. dollars is 1.30, they are definitely charging you an inflated rate of 1.33 - and pocketing the 2.5% difference as a fee for themselves.

Unless you actually look at your receipt or credit card statement, and compare the exchange rate they used, against the 'real' exchange rate from a currency exchange site (like XE.com) - you will have no idea about this hidden fee.

And by *they* I mean every bank, currency exchange center, ATM machine, and credit card in the world. They all want their 2.5% fee from you.

It's potentially going to get even more expensive for Canadians. As of May 1st - TD became the first bank to increase this hidden fee from 2.5% to 3.5% for ATM withdrawals in other countries.

Increasing the foreign exchange fee for credit cards may be next. The other Canadian banks are watching TD to see if they should do the same.

Ways you can exchange money - from worst to best

Method Obvious Fee Inflated Exchange Rate
Airport exchange kiosk        
Your bank at home    
Good independent currency exchange place at home
ATM in a different country
Prepaid reloadable cards
Credit cards (99% of them)
'No foreign exchange fee'
credit cards (rare)

Yes, there is one way to avoid both the obvious fee *and* the inflated exchange rate - with a 'No Foreign Exchange Fee' credit card

'No foreign exchange fee' credit cards are cards that charge you today's real, uninflated exchange rate - and with no other fees, they are the only way to truly buy something in a different currency without paying one cent in fees (hidden or obvious), provided you pay your credit card bill on time.

Personally, my money strategy when going on a trip usually looks like this:

- exchange *some* currency at a good, independent currency exchange place at home. In Toronto, the places I often see recommended as having the best rates are NHVN in Chinatown, Calforex in Eaton Centre, the Kantor branches, and Continental Currency.

Note however, that if the country you're going to visit uses an exotic currency (anything beyond dollars, pesos, or euros) - it may be better to wait until you get there. Exotic currencies can often be a rip-off to buy in Canada.

- while traveling, I pay for everything I possibly can with a 'no foreign exchange fee' credit card

- for everything else that absolutely requires cash as payment, I use the currency I exchanged at home. When that runs out, I withdraw some more from the ATM in the foreign country.

The key with ATM withdrawals is to find that balance, where you're making as few ATM withdrawals as possible, but without walking around with a ton of cash. I also need to time that final ATM withdrawal so I don't end up with too much foreign currency at the end of the trip.

So what are the best 'no foreign exchange fee' credit cards?

This type of credit card is fairly rare. Out of the hundreds of credit card options available to Canadians, only a handful of cards use the true, uninflated exchange rate at the time of purchase.

The 5 best 'no foreign exchange fee' credit cards

Card My Thoughts
Home Trust Preferred Visa

Home Trust Preferred Visa

No annual fee, and charges you the real exchange rate.

Update: With significant downgrades coming to the Rogers line of cards in June 2020, the Home Trust Preferred Visa is actually, once again, perhaps the most attractive no-foreign exchange fee card.

There are a few other perks such as roadside assistance and car rental collision insurance included for free.

You can find more detailed info about my experience with the Home Trust Visa in this blog post.

Apply now

Brim Financial Mastercard

Brim Financial

No annual fee, charges the real exchange rate, and comes with free access to Boingo Wi-Fi hotspots around the world (airplanes, airports, etc).

Apply now

Scotiabank Passport Visa Infinite

Scotiabank Passport Visa Infinite

Charges the real exchange rate, and comes with perks such as 6 airport lounge passes per year, and all kinds of insurance coverage: travel medical, trip cancellation / interruption, delayed / lost baggage, and flight delay.

You can also earn Scotia Rewards points.

But, it has a $139 annual fee. To justify the annual fee, this card is the best option if you think you might have a decent level of transactions in foreign currencies, or value the included lounge passes, or the insurance.

3 lounge passes alone would typically cost more than the annual fee.

Currently, you can earn a bonus of 40,000 Scotia Rewards points after making $1000 worth of purchases in your first 3 months.
Apply now

Rogers Platinum Mastercard

Rogers Platinum Mastercard

Update: With significant downgrades coming in June 2020, the Rogers line of credit cards has become somewhat useless for purchasing things in foreign currencies (except perhaps $USD). Focus on one of the cards above.

There's also the Fido Mastercard, which is essentially the exact same card.

Apply now

Rogers World
Elite Mastercard

Rogers World Elite Mastercard

Update: With significant downgrades coming in June 2020, the Rogers line of credit cards has become somewhat useless for purchasing things in foreign currencies (except perhaps $USD). Focus on one of the cards above.

Apply now

There are a few other 'no foreign exchange fee' credit cards available to Canadians, but I don't consider them as attractive as the 4 cards listed above. They are...

  • HSBC World Elite Mastercard
  • Scotiabank Gold American Express

  • Other tips for exchanging money or paying for things while traveling

    Is there any way to avoid paying high fees when making ATM withdrawals in other countries?

    All banks will charge the hidden fee (inflated exchange rate) but Tangerine / Scotiabank is the one bank that won't charge the additional obvious fee, if you withdraw from an ATM in the Global Alliance.

    ATMs in the Global Alliance include: Bank of America in the U.S., Scotiabank in Mexico, Caribbean, Central America or South America, and Deutsche Bank in Europe.

    You can find a complete list of ATMs in the Global Alliance here.

    There's also the Stack card (see below), which avoids the hidden foreign exchange fee, but you are still charged the obvious fee.

    Are there any prepaid or reloadable credit cards that avoid foreign exchange fees?

    Virtually all prepaid or reloadable credit cards are charging you the hidden fee (inflated exchange rate), and even worse, they usually have additional obvious fees. You are better off using a no foreign exchange fee credit card.

    But there is one option that truly does avoid both the hidden and obvious fees:
    The Stack Reloadable Mastercard.

    You install the free app, and within a few weeks they send you a reloadable Mastercard that you can load with funds from a variety of sources (no fees for loading).

    When you make standard purchases with the Stack Mastercard, there are absolutely no foreign exchange fees, hidden or otherwise.

    When you withdraw cash from an ATM, you avoid the hidden foreign exchange fees (inflated exchange rates), but you are still charged the obvious fee by the ATM provider.

    There's also the Revolut card which behaves the same way.

    What about withdrawing cash using my credit card?

    This is generally a bad idea. Most credit cards consider this a cash advance, and start charging you interest immediately.

    Yes, there are sometimes ways around the interest charge, by overpaying your credit card first, but this can still be a bad idea for other reasons, and you'll still be charged a cash advance fee.

    If the machine asks, choose to be charged in the currency of the country you're in

    When you're in another country, and the debit or credit machine asks if you would like to be charged in your home currency (Canadian dollars) - do *not* select this option.

    It may seem like a good idea, but what's really happening when you select that option is that the machine's provider is determining the exchange rate when calculating the amount you will be charged in $CAD.

    I guarantee that this will be an even more inflated exchange rate than the one that Visa or Mastercard uses.

    What you want to do is select the option to be charged in the currency of the country you're in, and let Visa or Mastercard use their typical 2.5% inflated exchange rate.

    Beware: I have heard that with some machines, if you use the tap method to pay, you may not even be asked, and it will automatically charge you in $CAD, with the terrible exchange rate.

    Is there a way to avoid foreign exchange fees when sending an international money transfer?

    You may want to look into TransferWise.

    They use the real exchange rate, without the hidden 2.5% markup. There is still an obvious fee (small percentage and fixed fee) but they are transparent about it.

    What currency should I bring to Cuba to convert to Cuban pesos ?

    Definitely Canadian. Definitely not $USD. The exchange rates are set by the government and should be the same everywhere.

    You can't buy Cuban Pesos outside of Cuba.

    What currency should I use in Mexico?

    Pesos are the best currency to use in Mexico. Not $USD. Convert some Canadian dollars to Pesos before you go, or when you get there.

    When using the ATMs in Mexico, choose the legitimate bank ATMs. Not the street ATMs.

    SUMMARY: The best way to withdraw cash or pay for things in a foreign currency, depending on your goal

    The chart below is a summary of all the different options presented in this article.

    The options above the grey lines are what I personally feel to be the best options.

    STACK MastercardRevolut CardTangerineSTACK MastercardRevolut CardRogers World Elite MastercardRogers Platinum MastercardBrim FinancialHome Trust Preferred VisaScotiabank Passport Visa InfiniteTransferwise

    Jump to: The 4 best 'no foreign exchange fee' credit cards

    Jump to: Ways you can exchange money - from worst to best

    Jump to: Top of this article

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    14 Responses to "What is the best way to exchange money or pay for things in a different currency?"

      Has Karney Li been here?
         Karney Li on June 10th, 2018

      Here's a tip, you can avoid the cash advance fee on your credit card if you OVERPAY the balance before you leave for your trip so that when you use the ATM in the foreign country you're not getting charged any cash advance. They'll still charge you something like $3-5 for using the ATM but at least there's no interest charge.

      Has Zoe been here?
         Zoe on October 19th, 2018

      Hey Chris,
      I’m currently in Morocco and due to their banking regulations, no one can withdraw more than 2000 dirhams (roughly CAD$275) at the time which when you shop at the souks and book hammams for two people go super fast. You may hit the ATM again right after the first withdrawal but so much for minimizing banking fees.
      It’s one of those currency that cannot be bought abroad and one of those countries where use of credit card is super limited. I’ve literally had no choice but to hit the ATM as I did not wish to bring thousands of Canadian dollars cash upon my arrival.

      Has Nightrider been here?
         Nightrider on November 6th, 2018

      In US, use a US card, issued by a Cdn. Bank. Scotia and Royal have US cards. Payable in US currency. There is an annual fee for the card, but it is very minimal (US$35). You pay the bill in US currency when you return home.
      If you go to US often or travel a lot, this makes perfect sense.
      You also should have an US currency account to make it all worthwhile so that you can pay your US Visa bill in US currency.

      Many countries accept US$. So this type of card is handy. But watch out for some tricky moves. For e.g., at the duty free Dubai, I bought items and used the US credit card. Surprise, surprise, the BANK converts the purchase from US to Cdn then to the local. When you reach home, your US bill reads higher - a lot higher - than you spent. The conversions happen at the cashier and you are not even aware of it until you return home. This has happened in some other countries as well.

      So be aware.

      Has Bill J been here?
         Bill J on November 6th, 2018

      Scotia Bank Canada doesn't even support Scotia Bank in Latin America !!!!!!!

      Has mike been here?
         mike on April 9th, 2019

      I have a N26 card (www.n26.com) for travelling in EU.
      Canadians can get one if they can provide an address in a number of countries in EU (a friend, a forwarding address). I get the XE.com exchange rate, and can withdraw cash withour a fee in EU.

      Has Michael been here?
         Michael on April 9th, 2019

      TransfeWise is by far the easiest and cheapest option I have seen. Highly recommended.

      Has Nancy been here?
         Nancy on April 16th, 2019

      If I need cash I just go to a grocery store and get cash back on my debit card. I guess I am being charged the bank exchange rate but save the ATM fee/exchange rate. Because of one of your previous articles I do have the Home Trust Visa with no exchange fees. It’s great except it still can’t be tapped to pay - you have to swipe or insert it and enter a PIN which to me is a security risk if the machine has been tampered with.

      Has Barb McClurkin been here?
         Barb McClurkin on April 16th, 2019

      The best rate for exchanging Euros we found was at Starsky's (European based grocery store), it has foreign exchange booth inside. There is a location in Hamilton, as well as 2 in Oakville/Mississauga area.

      Has Dave Fritz been here?
         Dave Fritz on April 16th, 2019

      Hi, Chris,
      First, thanks for this and other good articles on your web sites.

      I have a Rogers Platinum card, chosen on your recommendation. There is now a profile setting that allows you to apply your cash back (still only once a year) to your card bill without having to make a call.

      A small point, the tourist money in Cuba is called a Convertible Peso or commonly a CUC, pronounced "kook". "Peso usually refers to the money for Cuban use. These days tourists can use it as well and the rate of exchange (only available at a cadeca) is around 25 to 1CUC. Pesos are useful in Cuban stores and some markets.


      Has Michelle Lee been here?
         Michelle Lee on April 25th, 2019

      Thank you for really useful tips!!!

      Has Narayana Reddy been here?
         Narayana Reddy on June 13th, 2019

      Thanks for this. It helps a lot.

      I have been using the Triangle World Elite and CIBC Aventura Gold cards, the latter carrying a fee.

      The Canadian Tire Triangle carries no fee and offers a few good perks. But it would be good to have a card that charges no fees for foreign exchange, as much as I do not like to have too many cards.

      Thanks again,

      Has Tony been here?
         Tony on July 22nd, 2019

      BRIM Financial!!!

      You forgot to mention that BRIM has a Mastercard credit card, with ZERO annual fee, ZERO foreign exchange fee, AND they give you 1% cashback!!!

      THE best deal going for a no-fee credit card that offers ZERO foreign exchange fees.

      Has John K. been here?
         John K. on March 26th, 2020

      Rogers World Elite card has been downgraded. It used to be effectively no added foreign exchange fee card. No longer:

      4% cash back on foreign currency purchases: gone!! Replaced by 3%, only on on USD purchases.

      2% cash back on Rogers items: gone

      1.75% cash back on all other: reduced to 1.5% on all other.

      Added: "global wifi", only for primary holder.

      Now has minimum annual spend of $15,000

      Has Chris Myden been here?
         Chris Myden on March 26th, 2020

      Thanks for the info John (and the e-mail), I'll be updating this article very soon, mentioning that the Rogers cards will no longer be a great option for foreign exchange purchases.

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