Travel Money Tips for Canadians

Traveling takes its toll on our wallets, even when we find great deals and aim to spend modestly. To add insult to injury, we also get dinged with all sorts of financial transaction fees if we’re not careful. Canadian banks in particular seem to have mastered the art of profiting from our vacations.

Here are some tips for minimizing the cost of your travel transactions. They’re written from a Canadian perspective, but many of the same principles apply for those of you hailing from elsewhere.

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Avoiding credit card foreign transaction fees

Even though Americans have enjoyed a trend towards credit cards that don’t charge foreign transaction fees, almost all Canadian credit cards still carry fees. Typically they’re around 2.5% , which can really add up if you’re spending thousands of dollars on a trip. And if you do any cross-border or online shopping with US retailers, you’re paying the fees on those purchases too.

Recently, Chase Bank from the US has entered the Canadian market. They offer three cards that promote ‘no foreign transaction fees’ as a key benefit:

  • Amazon Rewards Visa
  • Sears Financial MasterCard
  • Marriott Rewards Premier Visa

Get one of these and use it for all of your foreign transaction credit card purchases. That includes online shopping from US retailers, advance bookings with international companies (eg: tour companies, direct hotel bookings, train tickets, etc) and all in-country credit card transactions when travelling outside of Canada.

Note: don’t use it for foreign cash withdrawals, since you’ll be paying interest from the date of withdrawal. Instead, use your debit card for getting local currency. Which brings me to…

Minimizing ABM fees

Using ATM’s for local withdrawals is usually the easiest way to get your foreign currency these days. But if you’re not careful, you’ll get dinged with service fees, often around $5 every time you take out cash.

Here are my tips to avoid, or at least minimize these fees:

  • Use your no-foreign-fee card for most in-country purchases. In most destinations, you can use credit for hotels, transportation, tours and purchases at larger restaurants and shops. Just check first whether the establishment charges any credit card fees.
  • Minimize the number of withdrawals – take out as much as you feel comfortable with each time.
  • Check whether your bank has an ATM alliance, in which case fees may be reduced or waived if you use one of their partner banks. In some countries, the local bank may add a fee, but at least you won’t get double-dinged.
    • ScotiaBank is part of the Global ATM Alliance that includes member banks in the US and many countries in Europe, the Caribbean, South America and the South Pacific. Withdrawals are free at any of the partner institutions ABM’s when using a ScotiaBank debit card.
    • For travel to the US, fees will usually be waived at ATM’s that belong to The Exchange when using a debit card from one of the member banks. Many smaller Canadian banks are part of this alliance, including Canadian Western, HSBC, National Bank, Manulife Bank and a many Credit Unions.
  • If the above options don’t work for you, set up a bank account with lower ATM fees. For example, HSBC, PC Financial and Tangerine all offer accounts with lower foreign ATM fees of only $2 to $3 per transaction (vs the normal $5).
  • Check if your bank offers an account or plan that waives ATM fees globally. Usually these accounts have an annual fee and/or a high minimum balance, so consider carefully whether the plan makes sense for you. For example, BMO offers a Premium Plan that includes 5 free foreign ATM transactions and then charges $5 per transaction after that. But, the fee for the account is $30. Unless the account offers other benefits you need, it’s probably not worthwhile.

Getting the best exchange rates

Whether you’re using a credit card or exchanging cash, banks and foreign exchange offices will always take a spread. To get the most favourable rates:

  • Avoid foreign exchange booths at airports. They almost always have the worst rates – that’s the price of convenience. If you want to arrive with a bit of foreign currency, you’re better off ordering some through your bank at home before your trip.
  • Use your no-foreign-fee credit card as much as possible. Credit card issuers get and offer the best foreign exchange rates.
  • Always choose the local currency if you’re given a choice at the point of purchase. The exchange rate that the local financial institution is charging you will always be worse than what you’ll get from your home bank or credit card issuer.

Check out Oanda for some excellent online tools and a mobile app for currency conversion. Their traveler cheat sheets offer a super handy quick reference for common conversion amounts. You’ll also find options to include interbank spreads in your calculations depending on form of payment. (Note that their credit card interbank rate is for cards that charge foreign conversion fees – not applicable if you have one of the cards I mentioned above.)

Saving / collecting for travel all year round

Find a credit card that lets you earn points or dollars that can be redeemed for travel, and then charge almost everything you buy on it. You might as well be leveraging your everyday spending to contribute to your travel fund.

I highly recommend choosing one that has a flexible redemption offering where you aren’t tied to the company’s own rewards options. The ideal programs allow you to book your own travel, finding the best deals you can on the market, and then redeem your points against those travel purchases. They also lets you redeem points for the whole transaction, including taxes and fees.

There are actually quite a few Canadian-issued cards that offer exactly that. They’re all ‘premium’ cards with fees, but you can easily profit from the deal if you maximize your use of the card. And, if you are a longtime client in good standing with one of these banks, you may be able to negotiate a reduction in the annual fee on your card. I did!

Here are the flexible redemption cards I’m aware of:

  • Amex Gold, Platinum and Blue Sky Rewards cards
  • Capital One Aspire MasterCard – World Elite and Platinum
  • National Bank MasterCard – World and Platinum
  • Scotiabank Amex – Gold and Platinum
  • TD Visa – First Class Infinite and Platinum Travel cards

To help decide which one is right for you, find more details on Rewards Canada’s Guide to Choosing a Travel Rewards Card.

Happy (and affordable) travels,

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