How to avoid foreign exchange fees in Canada

foreign exchange fees

Whether you’re looking to travel, send money to friends or family abroad, or to make cross-border purchases, (FX) foreign exchange fees can quickly add up. The cost of converting currencies can be hidden, such as by being baked into your currency conversion rate, or they can be charged on top of the amount being converted. Here are a few tips on how to avoid these costly foreign exchange fees in Canada.

Profit from Currency Exchange Services Cartoon. Man Sits on Screen Large Smartphone. Mobile Application for Profitable and Convenient Exchange Currency Currencies. People Rejoice in Money.

Use a no foreign transaction fee credit card

When making purchases in a foreign currency, your credit card issuer will charge a foreign exchange fee that is usually 2.5% of the transaction amount. This is on top of the exchange rate for converting your Canadian dollars to the foreign currency. For example, if you purchase an item for US$100, you’ll be charged an additional fee of US$2.50.

Additionally, any returns and refunds in a foreign currency will also be charged another 2.5% fee when it is converted back to Canadian dollars. If you return your US$100 purchase, you’ll be charged another US$2.50 fee. This means you are out a total of US$5.00 for a US$100 return!

You’ll also lose any cashback rewards that you may have earned on your original transaction. Refund fees can quickly add up for large transactions, such as if you have canceled a refundable hotel booking in another currency.

Fortunately, there are no-foreign-transaction-fee credit cards available that can save you these costs. With a no foreign transaction fee credit card, you won’t be charged a forex transaction fee for foreign currency purchases.

The best no foreign transaction fee credit cards in Canada include the Brim Mastercard, with no annual fee, the Scotiabank Passport Visa Infinite card, which has a $139 annual fee, the Scotiabank Gold American Express, which has a $120 annual fee, and the HSBC World Elite Mastercard, which has a $149 annual fee.

There are some Canadian credit cards that charge a foreign exchange fee but offsets it with cashback. For example, the Rogers World Elite Mastercard charges a 2.5% foreign transaction fee but gives 3% cash back on U.S. currency transactions. This offsets the forex fee and still provides some cashback rewards, all with no annual fee. Another example is the Amazon Rewards Mastercard which provides 2.5% rewards for foreign currency purchases if you are an Amazon Prime member. However, returns cancel out your original cashback, which means that returns will cost you the same in FX fees as a regular credit card.

Other Canadian credit cards with no FX fee, or credit cards that offer cash back that offsets the FX fee, include:

  • Home Trust Preferred Visa
  • Meridian Visa Infinite Travel Rewards Card
  • Rogers Platinum Mastercard

With a no FX fee credit card, you can make foreign currency purchases in person in other countries or make online purchases without having to worry about any extra fees. You also won’t need to physically exchange cash, making it a convenient way to travel.

Use an online foreign currency exchange service

Banks typically charge high fees for exchanging currency. While the fee won’t be a separate charge, it’s baked into the transaction through a worse currency exchange rate. For example, if the current USD/CAD exchange rate is 1.30, a bank might charge you 1.32 to buy U.S. dollars and 1.28 to sell them back. This means that if you’re converting $100 USD to CAD, you’d end up with less than the market value after the bank takes their cut.

If you need to exchange cash, using an online foreign currency exchange service can save you money over converting your currency at a bank. Some companies offer convenient transfer options, such as the ability to pay using bill payment, debit/credit card, or bank transfer.

Online exchange services often offer better rates and lower fees. One of the most popular currency exchange websites is Wise (formerly TransferWise), which lets you receive, convert, and send multiple currencies with one account. The website offers international money transfers at the “real” exchange rate, meaning you won’t be charged any hidden fees. Instead, Wise is transparent in its pricing when you receive a quote for an exchange.

You might also need to convert currencies when sending or receiving funds from abroad. You can use Wise to send money to friends and family abroad and receive foreign currencies.

Other popular currency exchange websites include:

  • XE
  • Remitly
  • WorldRemit
  • OFX
  • OANDA

If you’re traveling to a country with a currency that’s different from your own, it’s always a good idea to have some of the local currency on hand. That way, you won’t have to worry about finding an ATM or dealing with conversion fees. You can order foreign currency ahead of time from most banks, however, bank rates are usually not favourable.

Some online exchange services, such as Wise, offer prepaid cards that can be loaded with foreign currencies. You can exchange your Canadian dollars for a foreign currency close to the mid-market rate, and then use the prepaid card to make purchases or withdraw foreign currency from an ATM at your destination. Note that international ATM withdrawal fees may apply.

If you would rather exchange currencies at a physical location, there are also physical foreign exchange companies in Canada. This includes Western Union, Money Mart, MoneyGram, and Canada Post Foreign Cash.

Use Norbert’s Gambit

Canadian investors looking to purchase U.S. stocks will need to exchange their Canadian dollars for U.S. dollars. While you can buy U.S. stocks with Canadian dollars, your stock brokerage will usually charge a hefty currency conversion fee for both your buy order and your eventual sell order. If you convert currencies, your brokerage might offer unfavourable rates. Instead of using your stock brokerage to exchange currencies, you can use what’s called Norbert’s Gambit.

Here’s how Norbert’s Gambit works:

  1. Purchase the Horizons U.S. Dollar Currency ETF (DLR), traded in Canadian dollars.
  2. Journal your DLR shares to DLR.U, which is traded in U.S. dollars.
  3. Sell your journaled DLR.U shares.

Once your DLR.U shares are sold, you’ll receive the proceeds in U.S. dollars. You can then use this to purchase U.S. stocks without any further currency conversion fees. When it’s time to convert back to Canadian dollars, simply purchase DLR.U, journal to DLR, and then sell your DLR shares to receive Canadian dollars.

A benefit of Norbert’s Gambit is that you can exchange large amounts of currency and only pay stock trading commissions and the spread for the ETFs. This can be a significant saving compared to traditional currency exchanges which often have high fees. However, it can take a few days for your shares to “journaled” over.

Summary

Using a no FX fee credit card for purchases, online currency exchange services to send and receive money, and Norbert’s Gambit for investing, are all ways that Canadians can reduce or avoid forex fees. With these tips, you’ll be able to avoid or reduce your foreign currency exchange fees and get the most out of your money.

Other articles from mtltimes.catotimes.caotttimes.ca

Canadian Tik-Toker reached 25 million followers

Canadian Tik-Toker reached 25 million followers

Facebook
Twitter
LinkedIn
Email
Is it possible to get an A for a 5-paragraph essay assignment in 1 hour? We can safely say yes, a student can get an A+ mark if he turns to EduJungles


staycation

The ultimate guide to planning a long family staycation in Canada

To guarantee that everyone has an amazing time, careful planning is necessary when organizing a lengthy staycation. Here’s the ultimate guide to planning your family staycation in Canada. Canada, with its vast landscapes, diverse cities, and rich cultural heritage, offers endless possibilities for a memorable family staycation. Whether you’re exploring the stunning natural beauty of

Meal kits

Cost vs. Convenience: Analyzing meal kits and traditional cooking

In this modern world and modern times, convenience often takes priority over cost, especially when it comes to food. Meal kits and traditional cooking represent two different approaches to home dining, and each of them has advantages and disadvantages. Analyzing these methods through the lens of cost and convenience provides insight into why individuals might

Condo renovations

Condo renovations Dos and Don’ts: Expert Tips for a Successful Project

Embarking on a condo renovations journey can be both exhilarating and daunting. Imagine transforming your living space into a stylish haven that reflects your personality and meets your needs. While exciting, the process can be full of challenges and unforeseen hiccups. That’s why we’ve gathered some condo renovation dos and don’ts from the experts to

Terrific Hair

Terrific Hair Means Tamanu – Earth to Body

Curly, straight, thick, thin, kinky or silky, tamanu loves and makes terrific Hair.  And scalps. Nutritionally dense yet gentle, tamanu is an effective and versatile nut oil. It stimulates, helps promote growth. prevents hair loss, reduces scalp itch and irritations and adds a natural sheen! Make tamanu a part of your hair and scalp care

Understanding the 4 legal process after a DUI Crash

A single mistake can have serious consequences, especially when driving under the influence. The aftermath of a DUI crash extends beyond physical harm and property damage. It involves a complex legal process that may feel overwhelming. As a responsible citizen, it’s vital to grasp the legal system and your rights in such situations. This blog

personal injury lawyer

Pedestrian accident: How a personal injury lawyer can help you

Accidents involving pedestrians can be life-altering. You could be walking down the street or crossing a street. A vehicle’s sudden impact can change everything right away. If you’ve found yourself in such a situation, you might be wondering how to move forward. This is where a personal injury lawyer steps in, offering crucial help and

Mtltimes Subscription

The latest on what’s moving Montreal and the world – delivered straight to your inbox