As we all know, traveling can be expensive. Between flights, hotels, and spending at the destination, travel purchases can add up even when redeeming points to reduce costs along the way. While many of us will turn to credit cards to fund these expenses, relatively hidden charges, known as foreign transaction fees or foreign exchange fees, can add up on these purchases.
In this article, I plan to shed some light on a credit card feature that not all Canadian consumers are aware of: cards that offer no foreign exchange fees! Canadian consumers have three main options when choosing a no foreign transaction fee card that waives this pesky 2.5% foreign transaction fee, which I will cover in detail below.
What are Foreign Exchange Fees?
Foreign Exchange fees, or FX fees, occur when we use a Canadian dollar credit card (or, god forbid, debit card) to pay for something in a foreign currency. These fees almost exclusively come in 2.5% denominations and quickly erase any value earned from spending on most cards, which makes avoiding them easily profitable.
How Much Will I Lose to Foreign Exchange Fees on an International Transaction?
At first glance, a 2.5% fee on each transaction may not seem like a big deal. However, it can be staggering if we do the math compared to a card that does not have these 2.5% fees. The first step is understanding how much a user is charged in easy-to-understand terms. For every $1,000 spent, $25 will be charged over and above the goods and services purchased.
Let’s say a traveler uses the ever-popular RBC Avion Visa Infinite card to pay for $1,000 CAD of uncategorized spending while abroad. They would earn 1,000 Avion points worth about $20, depending on how you redeem them. Factoring in the 2.5% foreign exchange fee of $25, this traveler came out $5 behind. That’s not the kind of rewarding spending we discuss in the points and miles world!
Comparatively, if the traveler puts that $1,000 of spend on the HSBC World Elite Mastercard, they will earn 2,000 HSBC Rewards points worth $10 when redeemed as a statement credit against travel. Considering that this traveler is saving on the $25 in foreign exchange fees, it’s a $15 net positive using this card!
The savings go even further if we take the example with bonus multipliers on popular spending categories.
The HSBC card earns 6 points per dollar spent on eligible travel purchases, even in a foreign currency, for an effective 3% return. The RBC Avion card earns 1.25 points per dollar on travel spend, for a return of 2.5%, but also includes a 2.5% foreign exchange fee for a net zero return.
Hotel rooms are often paid in the local currency of that hotel and make up the most significant expense of traveling aside from flights. If we have a $1,000 CAD hotel bill paid with the HSBC World Elite card in foreign currency, we end up with a $30 return, and $30 ahead of the RBC Avion Visa card.
Is Signing Up for a No Foreign Transaction Fee Credit Card Worth It?
This question will have to be answered by every traveler individually, as it does depend on where you’re traveling and what your spending patterns look like. For most points enthusiasts, we enjoy maximizing our points with First Class, and Business Class trips across the globe. This often means paying for hotels, food, and activities in foreign currency.
For example, if $5,000 in foreign transaction expenses are put on the HSBC World Elite MasterCard, that’s $125 saved that you would be out of pocket when using a credit card that charges foreign transaction fees. The money that you would use to pay foreign transaction fees can quickly add up to a nice dinner out in most destinations!
If you focus mainly on domestic Canadian travel, there might still be a place for these cards as they offer benefits beyond no foreign exchange fees, which can offset the annual fee. Not to mention, these cards also save the foreign transaction fee when making any foreign currency purchases online.
Best Canadian Credit Cards with No Foreign Transaction Fees
When it comes to Canadian credit cards which offer no foreign transaction fees as a benefit, there are three main cards: the Scotiabank Gold American Express card, the HSBC World Elite Mastercard, and the Scotiabank Passport Visa Infinite card.
However, these cards offer much more than simply no foreign transaction fees, as covered in the table below.
|Scotiabank Gold American Express Card||HSBC World Elite Mastercard||Scotiabank Passport Visa Infinite Card|
|Everyday Spending Multipliers||✔️||❌||❌|
|Strong Insurance Coverage||❌||✔️||❌|
|Travel Spending Multipliers||❌||✔️||❌|
|Annual Travel Credit||❌||✔️||❌|
Let’s dig into each one of these cards to see the value they offer in addition to charging no foreign exchange fees.
Scotiabank Gold American Express Card
The Scotiabank Gold American Express card has recently seen a few improvements, with Sobeys switching over to the Scene+ program. It offers 5x on eats and drinks and the highest grocery multiplier of any Canadian card, with 6x at Safeway, Sobeys, and other Empire-owned eligible grocery stores.
The Scotiabank Gold American Express card earns Scene+ Rewards points and gives cardholders the opportunity to earn 5x Scene+ points on grocery, restaurant, and entertainment purchases. This card charges no foreign exchange fees.
For 2023, we selected this card as the Best Credit Card for Grocery Purchases.
Check out our Scotiabank Gold American Express review for full details about this card.
Scene+ Rewards points are a desirable currency because there’s not a lot of planning required to extract value. They are worth a maximum of one cent per point when redeemed against travel purchases, which is how most people should be using them considering the no foreign transaction fee feature. There are no transfer partners or portals to book through, simply charge a hotel stay, flight, or other eligible travel expense to the card, log into online banking, and choose to offset the charge with your Scene+ points.
One of the unique features of this card is that it qualifies for Amex Offers. These can help offset the annual fee, which sometimes can only take one offer to do so. Last year we saw quite a few reasonable offers, including “United Spend $500, get $250 back” and “Amex Travel Spend $500 get $150 back.” Taking advantage of either of those would pay back the annual fee, so even if you take an unscheduled trip out of the country, you’re covered!
The last point I want to bring up is that this card offers 5x on entertainment and ticketing sites. If you’re a big concert fan (like my wife, hello Taylor Swift tix!), this is a multiplier unique to this card. I purchased our *very expensive* Swift tickets with my TD Aeroplan Visa Infinite Privilege card and received back 1.25 Aeroplan Points per Dollar, or about 2.5% back. I would have doubled my return on spending if I had purchased them with the Scotia gold at an effective 5% earn rate.
It is important to note that if you charge in a foreign currency on this card, the bonus categories do not apply, and rewards are paid at 1x.
HSBC World Elite Mastercard
The HSBC World Elite Mastercard won our award for Best Foreign Transaction Credit Card for a good reason. It carries a minimal yearly overhead due to its $100 travel enhancement credit, excellent insurance, and no foreign transaction fees.
The HSBC World Elite Mastercard earns HSBC Rewards points and offers cardholders benefits including an annual $100 travel enhancement credit* and free Boingo Wifi membership.
For 2023, we selected this card as the Best Foreign Transaction Credit Card.
Check out our HSBC World Elite review for more details about this card.
80,000 HSBC Rewards
Cardholders will find that the $100 credit is easier to redeem than it might initially seem, so if that’s holding you back, you may want to keep an open mind. With that in mind, this card has an annual fee of $149 minus the $100 travel enhancement, working out an effective cost of only $49 per year.
Not to mention, the HSBC World Elite Mastercard is perfect for paying taxes and fees on Avios or other currency bookings, as this card’s insurance kicks in as long as a portion of your trip is paid with the card.
As we saw earlier, with a 6x or 3% earn rate in HSBC Rewards points on eligible travel purchases in a foreign currency, it’s easy to earn back that $49 fee if you put zero value on the insurance. You’ve broken even if only $1,650 CAD is spent on hotels or flights in foreign currency.On top of all that, being a World Elite card, you’ll have free access to Boingo Hotspots. This is the provider of WestJet in-flight Wi-Fi and is the icing on a rewarding credit card cake.
Scotiabank Passport Visa Infinite Card
The final card we recommend for avoiding foreign transaction fees, the Scotiabank Passport Visa Infinite card, can be the perfect travel companion for someone who wants a one or two-card wallet. The earn rates on this card are less rewarding, but it is full of benefits thanks to being a Visa Infinite product.
The Scotiabank Passport Visa Infinite card earns Scene+ Rewards points and offers cardholders benefits such as no foreign transaction fees and six complimentary airport lounge access passes annually.
This card also earns Scene+ Rewards points and shares similar earning rates as the Scotia Gold but only gives 3x at Empire stores and 2x on entertainment purchases. What it gives up there, it does make up for with six complimentary DragonPass Lounge visits through the Visa Airport Companion Program. It also allows access to the Visa Infinite Hotel collection, enabling you to access elite-status-like benefits without having elite status.
In addition to both of those Visa benefits, you also have access to the Visa Wine Country program, which allows access to discounted or even free tastings at some wineries. When we lived in Toronto, we could visit four wineries in Niagara that offered free tastings, it’s an underutilized perk, in my opinion!
This card does come with a $150 annual fee, so if you’re not taking full advantage of the lounge visits or other Visa perks and are open to having more than one or two cards, you may want to look elsewhere.
No Foreign Transaction Fee Credit Cards in the United States
If you’re further along in your points and miles journey or are out for points revenge like I am, the US market is an excellent solution to avoid foreign transaction fees. The US Credit Card market is much more competitive than the Canadian one, making a more rewarding landscape for consumers.
For example, we only have three cards in Canada that offer a no foreign transaction fee feature, while in the US, this is a staple for any card that markets itself as a travel card.
Even my American Express Hilton Honors card, which doesn’t have an annual fee, offers no foreign transaction fees. On top of having no foreign transaction fee, the welcome bonuses offered south of the border can be more rewarding, not to mention that there are many more of them.
Since these cards have no foreign exchange fees, we can use them for daily spending in Canada. For more info on how to do this as a Canadian, check out our posts on US credit cards and our ITIN service, or apply for your first US credit card with Nova Credit.
Foreign transaction fees are annoying and cause most consumers to pay more than they must when traveling abroad. Whether you’re looking for an extra card to add to your wallet specifically for this use case or an all-in-one solution, Canada has a few options to help save you money. If you’re ready to branch out into the US market, these cards can help you save on foreign transaction fees and offer more deeply discounted travel.
Until next time, never pay full price for travel, and don’t pay any foreign transaction fees!
Frequently Asked Questions
Are credit cards with no foreign exchange fees worth it?
In most cases, yes. Hotel bills alone, never mind activities at your destination, are always billed in local currency. The 2.5% fee adds up quickly and can quickly outweigh the cost of another annual fee on a specialty credit card. Remember that these cards offer great benefits besides their 2.5% advantage!
When making a transaction, should I choose to pay in the local currency or in Canadian Dollars?
Always the local currency. Every time. When a business offers to do this for you, they’ll often give an exchange rate marked up by at least 5%. I have even seen markups in the 10% range, personally.
What will the foreign exchange rate be for my transaction?
The rate is calculated when your transaction takes place and will fluctuate with the world markets. Using major transaction processors like Amex, MasterCard, and Visa, rates are always fair.
Why would I use a no foreign transaction fee credit card instead of cash when traveling?
Using a credit card allows an added layer of protection on purchases such as hotels, car rentals, etc. In addition, by taking out large sums of cash to pay for everyday items, you will pay ATM fees through your bank account and the local ATM itself. Not to mention the ability to “lock” your credit card if it is lost or stolen.
Is my no foreign transaction fee credit card accepted in all countries worldwide?
It will depend on where you visit. Visa has the largest network of accepted merchants, but Mastercard is accepted in a few more countries. American Express is close to both in terms of merchant acceptance but needs to catch up with about 70 fewer countries accepting the processor.
Most major destinations and countries will take all three major networks, and you’ll only run into acceptance issues off the beaten path.
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2 comments on “Best No Foreign Transaction Fee Credit Cards for Canadians”
Another free option is to use the Wealthsimple Cash Mastercard which has no fees.
True, a good free option with no credit inquiry.
You will get a lower return on spend than these credit card options, however.