Foreign exchange transaction fees, or FX fees for short, are charges imposed by financial institutions when customers conduct transactions in foreign currencies or make purchases abroad. These charges typically represent a percentage of the transaction amount and can rack up rather quickly.
In this article, we cut through the clutter to provide a concise exploration of FX fees in Canada – what they are, when they're charged, how much they tend to be, and, crucially, how to avoid them.
Let’s dive in!
Key Takeaways
- FX fees are charges imposed by Canadian financial institutions for transactions in foreign currencies.
- The standard FX fee in Canada is 2.5%.
- Customers can avoid fees by opting for credit cards with no FX fees, exchanging currency before travelling, and using prepaid travel cards.
What are foreign transaction fees?
FX fees are surcharges imposed by financial institutions when individuals engage in transactions involving foreign currencies. These fees are typically 2.5% of the total transaction amount and serve to compensate the financial institution for the additional costs and risks associated with handling currency conversions.
In addition to charging flat FX fees, it’s also good to note that financial institutions tend to use marked up exchange rates when making conversions, increasing the overall cost of foreign transactions even more.
How much are foreign transaction fees?
The standard foreign transaction fee in Canada is 2.5%. With that said, however, it’s crucial to read the terms and conditions of your debit or credit card before making purchases abroad to ensure you understand all of the fees you’ll be charged.
Assuming a standard 2.5% fee, you can expect to pay a minimum of $2.50 per $100 spent in Canadian currency.
How to avoid FX fees
While FX fees are commonplace in Canada, they aren’t unavoidable. Consider using the following tips and tricks to avoid FX fees on your next international adventure:
- Get a no FX fee credit card, such as the Scotiabank Gold American Express® Card.
- Exchange your Canadian currency for the foreign currency of your choice before leaving the country to secure more favorable rates and avoid ATMs abroad.
- Look into multi-currency bank accounts, such as those offered by Wise.
- Consider prepaid travel cards.
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What’s your experience with FX fees?
FX fees can rack up really quickly. What’s your best tip for avoiding them?
Let us know in the comments!
FAQ
How do I calculate a foreign transaction fee?
To calculate a foreign transaction fee, multiply the transaction amount by the percentage fee imposed by your financial institution. For example, if the fee is 3% and the transaction is $100, the foreign transaction fee would be $3.
What’s the difference between foreign transaction fees vs. currency conversion fees?
Foreign transaction fees are charges applied by your financial institution for international transactions. In contrast, a currency conversion fee is for the conversion of one currency to another by the payment processor.
What’s the best no foreign transaction fee credit card?
The best no foreign transaction fee credit card is the Scotiabank Gold American Express Card. It has a generous welcome bonus and excellent earn rates for the Scene+ program. Plus, enjoy travel insurance and American Express benefits.
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