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Wednesday, December 12th 2018

"I'm a travel junkie who's hooked on deals from YYC." - Chris Myden



2018
8
June
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)   NONE   NOPE


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 Calgary, I often see Calforex branches recommended as having the best rates (downtown and Chinook Centre). Another one that is often recommended is Canex Forex in Eau Claire.

Note however, that if the country you're going to visit uses an exotic currency (anything beyond dollars 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 very rare. Out of the hundreds of credit card options available to Canadians, only a handful use the true, uninflated exchange rate at the time of purchase.

And of that handful, it usually comes down to the following 4 options that most people will consider:

The 4 best 'no foreign exchange fee' credit cards

Card My Thoughts
Home Trust Preferred Visa

Home Trust Preferred Visa

With no annual fee, and by charging the real exchange rate, *and* an additional 1% cashback on top, you are effectively getting 3.5% cashback on everything you buy in a foreign currency. Tough to beat!

This is the card I currently buy everything with while traveling.

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

Rogers Platinum Mastercard

Rogers Platinum Mastercard

No annual fee, and 3% cashback on all purchases in a foreign currency, which effectively means it charges you the real exchange rate, just like the Home Trust Visa.

You also earn 1.25% cashback on all purchases in Canadian dollars.

At the end of the day, the Home Trust Preferred and the Rogers Platinum are pretty much even in terms of the amounts most people will save with typical usage.

A few reasons why I went with the Home Trust Visa over the Rogers Platinum Mastercard:

- The cash back from Rogers can only be applied to your Rogers bill. Except, once a year, you can call in and have it applied to your Mastercard bill instead. This just seemed like a hassle, and I'm not a Rogers customer.

- Visa is accepted pretty much everywhere in the world, while Mastercard is a close second. Costco in the U.S. for example, only accepts Visa.

There's also the Fido Mastercard, which is the exact same card, but the cash back applies to your Fido bill.

Apply now

Rogers World
Elite Mastercard


Rogers World Elite Mastercard

This card is somewhat similar to the Rogers Platinum above, but it's actually even better.

It also has no annual fee, but offers 4% cash back on purchases made in a foreign currency, and 1.75% cash back on purchases made in Canadian dollars.

It also has a little bit of travel insurance (but not nearly as comprehensive as the Scotiabank Passport below).

But, to qualify for this card, you need to make $80k/year (or have $150k total household income). Although I have heard of people qualifying with less.

If you do meet the income requirements, it's a no-brainer to choose this card over the Rogers Platinum.

The Rogers World Elite has the same downsides to consider as the Rogers Platinum described above (not truly 'cash back', and Mastercard vs Visa acceptance worldwide).

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 25,000 Scotia Rewards points after making $1000 worth of purchases in your first 3 months.
Apply now



Other tips for exchanging money or paying for things while traveling


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

All banks will charge the hidden fee (inflated exchange rate) but Tangerine 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.

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.

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.

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

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

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


    Has WT been here?
       WT on June 13th, 2018

    Thanks for this!

    Has Asi been here?
       Asi on June 13th, 2018

    Is it better to exchange usd in Canada or exchange when we get to U.S?

    Has Chris Myden been here?
       Chris Myden on June 13th, 2018

    WT: No problem!

    Asi: I would say that assuming you exchange your money in Canada at a place with the best exchange rates (such as Calforex in Calgary), it's unlikely you'd do much better exchanging it in the U.S.

    The story can be different for more exotic currencies, where you might be better off waiting until you get to the destination to exchange.

    But for $USD, being so common, the rates here in Canada (at competitive exchange places) are about as good as it gets.

    Has Spence been here?
       Spence on June 28th, 2018

    Thanks for this! Not sure how I missed the original post but just ordered the Scotiabank card. Just an FYI that the 25,000 point offer looks like it ends on June 30th, so all applications have to be submitted by then to qualify for the offer. Just in time for our trip to Florida in July!

    Has Maria been here?
       Maria on July 4th, 2018

    Great information.
    Guess I have more of a ?

    I heard going through the Canadian Snowbirds association currency, To have them deposit monies $ to your US account you get a better rate as well. For people whom go to the US for six months out of the year. Have you heard of this?

    Has Julia been here?
       Julia on July 9th, 2018

    Thank you for the great post. What's your opinion on getting Japanese Yen? Should I buy it in Calgary or in Japan?
    Thanks again

    Has Chris Myden been here?
       Chris Myden on July 9th, 2018

    Hi Julia,

    I would think Japanese Yen would be common enough that a place like Calforex could offer pretty competitive exchange rates. Not sure about local banks.

    When you try the order form on the Calforex website, it shows what they're using as the exchange rate.

    When I compared it against today's 'true' exchange rate from XE.com - it seems pretty competitive.

    What you can do is see how much, say, 25,000 Yen would cost using XE.com

    Let's say the XE.com calculator shows 25,000 Yen equaling 295 Canadian.

    I would then multiply 295 by 1.025, and add another $6, for a pretty good idea of the best you can probably hope for, at a good exchange place in either Japan or Canada, or from an ATM withdrawal in Japan.

    So in this case, 295 x 1.025 would be $302. And then add $6. So $308 Canadian being the best total price one could realistically achieve to purchase 25,000 yen at today's rates.

    You can then call Calforex and ask how much 25,000 Yen would be, and see if it's close to that number. Each branch sets their own rates.

    Has Chris Myden been here?
       Chris Myden on July 9th, 2018

    Hi Maria,

    I can't say I had heard of the Canadian Snowbird currency exchange program, but I took a look and it seems legitimate. My best guess is that being a not for profit organization, it probably is a bit better rate than the banks usually give.

    If you go to this link it shows what their current exchange rates are:

    http://www.snowbirds.org/snowbird-currency-exchange-rates

    You can compare that against the live rates from XE.com - if you add 0.025 to the live rate, and the Snowbirds are below that number, it's a very competitive rate.

    For example, today's live rate on XE.com is 1.31. Adding 0.025 to that, we get 1.33. And the Snowbirds are claiming to offer 1.327.

    Has Colleen been here?
       Colleen on July 9th, 2018

    Thanks for the info and websites, Chris! I used to go to Global Exchange and buy currency when the exchange rates were good, but GE does not exist any more. Doesn't Calforex want a high minimum transaction? In my research I found that AMA offers a not bad price to purchase. I am not a member though so can't use it.

    Has Sean been here?
       Sean on August 22nd, 2018

    You're forgetting about cryptocurrency ATMs and trading networks; they have allowed me to travel without paying exchange rate fees using BCC or XBT to whichever currency. You only have to get to the ATM or meet the person at a public place like an LRT station. Forget about cards which make corporates even more rich -- use an open-source, cardless, decentralised solution!

    Has Panorama been here?
       Panorama on October 18th, 2018

    There are a couple of other options available for CAD to USD (and vice versa) conversions that avoid the FX fee.

    1) Get a Royal Bank account (CAD)
    2) Get a Royal Bank account (USD)
    3) Get an account with RBC Bank Georgia (USD) through Royal Bank (note that RBC Bank Georgia is an actual American bank domiciled in the USA)
    4) Link these accounts together on your online profile which Royal Bank can help you to do

    To exchange from CAD to USD without the FX fee, transfer online from Royal Bank CAD account (obtained in Step 1) to RBC Bank Georgia account (obtained in Step 3). If you want to withdraw this USD in Canada as cash prior to travelling, you can transfer from RBC Bank Georgia to your Royal Bank USD account obtained in Step 2.

    * Note that you should not transfer from Royal Bank CAD to the Royal Bank USD account as that will have the FX fee.

    To exchange USD to CAD, transfer from RBC Bank Georgia to Royal Bank CAD. Again, do NOT transfer from Royal Bank USD to Royal Bank CAD as that will have the FX fee.

    Another way to avoid FX fees is to use "Norbert's Gambit", which is, in essence, using the stock markets to convert currencies. This is handy for larger sums.

    I also have the Home Trust preferred card for purchases in currencies that are not CAD or USD and I like the cashback, roadside assistance, and no annual fees.

    I use all three of the above techniques to avoid the FX fees like the plague.

    Hope you all find these suggestions helpful.

    Has Luke been here?
       Luke on November 4th, 2018

    The Cheapest way I've found to change money to the Philippines is to remit it. It costs me $10 for however much I want to send, and I can pick it up when I land. There's a way to remit it to a certain place, but if you have a close Filipino friend or loved one, you can send it to their bank. That's what we do when we travel, as my fiancé is Filipina. Exchange rate is equal (or sometimes better) than XE, and if you're changing $1000 it only equals 1% you're paying.

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