Credit Cards

Best way to avoid USD currency conversion fee?

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  • Feb 12th, 2018 2:26 pm
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[OP]
Member
Oct 17, 2007
464 posts
105 upvotes
Mississauga

Best way to avoid USD currency conversion fee?

I'm planning a trip which will be charged in either USD or GBP - I currently have an RBC Visa Signature, MBNA Mastercard and a regular AMEX. Am I correct in assuming that I will be charged a 2.5% currency conversion fee if I pay with any of these cards?

Is the best way to handle this transaction (without incurring additional fees) to apply for a card with no currency conversion fees? What are the best cards available for this purpose?

I would really rather not have another credit card, so once I pay off the balance, I would probably just cancel it. Actually, if there's some other way to go about this without getting another card, that would be the ideal option.
5 replies
Sr. Member
Feb 1, 2018
961 posts
1098 upvotes
Montréal
The first thing to do is to get a little bit of perspective.

For the occasional traveller, let's say you go on a trip and pay for $1000 of expenses in foreign currency. (Flights are usually charged in CAD if purchased here). So, the 2.5% surcharge on $1000 is... $25.

Remember that currency exchange rates fluctuate all the time. The US dollar or British pound could go up against the CAD tomorrow, which would cost more than that. Also remember that you're paying the MC or VIsa difference between buy and sell rates anyway, on top of the FX fee.

Now, given all that, how much hassle will you go through to save $25?

Of course, for frequent travellers or shoppers who spend a lot more than that, snowbirds who live a few months of the year in the US, or a variety of other people, that FX fee can cost a whole heck of a lot more. For those people, getting a 0 FX credit card (like HT), a card with cash back to negate the FX (like Rogers/Fido), and/or a US-issued credit card and bank account for people with US income and part-time residency, may be solutions worth considering.

But if you're just planning one trip, it's probably not worth the hassle of applying for and getting an entirely other credit card. Just charge stuff to your regular credit card, or withdraw foreign currency from an ATM (preferably using a chequing account that charges no additional fees. And don't worry about it.
[OP]
Member
Oct 17, 2007
464 posts
105 upvotes
Mississauga
Thanks for the feedback - FYI this isn't for out-of-country purchases, but for payment of the vacation package itself, which will be close to $5,000 USD... I'm looking at $125 conversion fee. I'll be having a more in-depth conversation with the tour operator tomorrow - I'll see if they can charge me in CAD, and go from there.
Sr. Member
Apr 23, 2017
998 posts
1730 upvotes
If one spends more than $5,000 in foreign transactions per year it is nice to get a no FX card (Home Trust Visa Preferred, or the new Brim card).

On the extreme end, spend US$100k in a year and the FX fee is $2,500 (mentioned on the Brim webpage)
As a casual user, spend US$2,000 in a year and the FX fee is $50., or spend US$1,000 per year and the FX fee is $25.

If I was only spending US$1,000 per year outside of Canada I would not bother getting another card to save only $25. (but everyone is different in their thresholds).

If I used a Can$ FX fee card for my US spend I myself would pay roughly $300 per year in FX fees. That is a more than the AF of most premium cards. So I don't like that my Canadian cards charge me FX fees. What I have done the past 10 years is use a US$ card in the US and pay it with US$. I buy the US$ in bulk when the rate is good, and use that stash of US$ to pay the US$ card balance month to month. I still pay FX fees to buy the US$ in my US$ account (less than 2.5% though), but compensate for that by only buying US$ when the exchange rate is favorable. Back in 2008/9 the rate was very favorable; a year ago the rate was very unfavorable.

P.S. If your tour operator converts the US$ bill to Canadian $ for you, watch out that they don't just add the 2.5% FX fee by baking it into the Can$ package price they give you.
Sr. Member
Feb 1, 2018
961 posts
1098 upvotes
Montréal
tezster wrote: Thanks for the feedback - FYI this isn't for out-of-country purchases, but for payment of the vacation package itself, which will be close to $5,000 USD... I'm looking at $125 conversion fee. I'll be having a more in-depth conversation with the tour operator tomorrow - I'll see if they can charge me in CAD, and go from there.
Makes sense. Just remember that if the CAD goes down against those foreign currencies in the time it takes you to apply for and get approved for one of these cards, you could lose more than $125. (Of course, if it goes up, the opposite is true. FX is always a gamble.)

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