6 Best No Foreign Transaction Fee Credit Cards in Canada for 2024
Aug 1, 2024The majority of credit cards charge a 2.5% fee on every purchase you make abroad. Avoid it by choosing a credit card with no foreign transaction fees. A U.S. dollar credit card can also be handy if you make frequent U.S. purchases.
Have you ever looked at your credit card bills after returning home from a trip abroad and been shocked at how much each purchase actually cost you? Or ordered something online from an American retailer that turned out to be more expensive than you expected? It’s not that the exchange rate is worse than you thought — your credit card issuer likely added a foreign transaction fee, or FX fee, to the purchase.
‘No foreign transaction fee’ credit cards, sometimes referred to as international credit cards, don’t charge you extra when you shop abroad. If you travel often or make frequent foreign transactions online, one of these credit cards could help you save some cash.
Here are the best ‘no foreign transaction fee’ credit cards, according to NerdWallet’s analysis.
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BACK TO TOPNerdWallet Canada selects the best credit cards based on unique attributes, overall consumer value and suitability for specific kinds of consumers. Factors in our evaluation methodologies may include annual fees, rewards rates, interest rates and other noteworthy features specific to the card type. To learn more about how we evaluate and select financial products, you can review our credit card methodology.
What to know about credits card with no foreign transaction fee
Credit card fees can be confusing to untangle, and foreign transaction fees are no different. Learn how and when they’re applied so the bill from your next international adventure doesn’t include any surprises.
What is a foreign transaction fee?
When you buy something that’s not in Canadian dollars using your credit card, the issuer typically charges a fee — such as 2.5% of the purchase price. This fee is called a foreign transaction fee. You may not have noticed it before, since it’s rolled into the total charge that shows up on your statement.
It doesn’t matter if you’re making an online purchase in U.S. dollars from your Canadian living room or paying for dinner out in Istanbul. If the product or service is being sold in a foreign currency, it’s typically subject to fees. Fortunately, there are credit cards that don’t charge foreign transaction fees. However, the card’s network may markup the exchange rate by a small amount.
Visa and Mastercard exchange rate markups
In addition to the transaction fee charged by the issuer, credit card networks typically markup the cost of converting money. For example, the Bank of Canada may list the exchange rate from USD to CAD as 1.35 (for every $1 USD you spend abroad, you’re spending $1.35 CAD). But when you use your credit card, the network (e.g., Visa) may be using a slightly marked up rate of 1.36, meaning for every $1 USD you spend, you’re actually spending $1.36 CAD. So, the conversion is costing you slightly more.
You can use the below calculators from Visa and Mastercard to estimate your total transaction costs. American Express does not post conversion markups for Canada publicly.
Dynamic currency conversion
It’s worth noting that some merchants allow you to choose between the local currency or your home currency, which is known as dynamic currency conversion, or DCC. If you choose to pay in CAD, you’ll pay the exchange rate set by the merchant at that moment, which can be considerably higher than the standard rate. Therefore, it’s often advisable to pay in the local currency.
How to calculate foreign transaction fees
While most credit cards charge a foreign transaction fee of around 2.5%, some can be higher. You’ll have to check your credit card terms and conditions for the specific fee you’ll be charged.
To calculate how much you’re paying in FX fees, follow the below steps:
Convert the amount you’re spending to Canadian dollars using the most up-to-date exchange rate. (If you want a more accurate calculation, you can use the currency exchange rate issued by your credit card network).
Divide that figure by 100.
Then multiply it by the transaction fee.
🤓 Let’s do the math
Let’s say you’re visiting the United States and you want to pay for a meal that costs $50 USD, and your card’s foreign transaction fee is 2.5%. Assuming your credit card’s network’s current exchange rate for USD to CAD is 1.35, here is how the calculation works out:
$50.00 USD x 1.35 = $67.50 CAD
$67.50 / 100 = $0.675
$0.675 x 2.5 = $1.69
The foreign transaction fee for this purchase would be $1.69. And your total would be $69.19 CAD.
Should I use a U.S. dollar credit card?
If the majority of your purchases are in American dollars, credit cards like the BMO U.S. Dollar Mastercard or Roger’s World Elite Mastercard can be handy, as U.S. purchases earn a higher reward rate. However, a foreign transaction fee will still apply.
You also need to consider how you’ll pay your monthly credit card bills. A U.S. dollar credit card may require you to pay your bill in USD. If you don’t have a steady stream of U.S. income, you’ll need to convert your Canadian dollars to USD before you can pay your bills — which also comes with fees.
Although paying a 2.5% conversion fee may not seem like a lot, it can add up over time. If you travel frequently and plan to make more than a few sporadic purchases in foreign currencies, consider getting a ‘no foreign transaction fee’ credit card to help you keep costs down.
DIVE EVEN DEEPER
Shannon Terrell
Georgia Rose