Travel Credit Cards

Key points to remember

Travel credit cards can be the best way to spend when you're on holiday. But if you don't pay off the balance in full, the interest you incur could wipe out the gains you earned on the exchanged currency.

When abroad, you are usually asked which currency to pay in. As a general rule of thumb, paying in the local currency will offer you a better exchange rate.

If you pay in Canadian dollars, the retailer will do the conversion and the exchange rate they will use is usually worse than your card.

Using a travel credit card and paying in local currency, means that your card does the conversion and the rates are usually excellent.

Note that if you use a standard credit card or even your debit card, the rates offered to you would be quite average. You may also incur fees.

Spending on a travel credit card will usually be cheaper than withdrawing cash. Whilst there may not be any withdrawal fees, you'll likely incur interest on the withdrawal until you pay it off.

If using a debit card, spending will also likely be cheaper than withdrawing cash. Whilst no interest will be incurred, you'll likely be charged an ATM fee or non-Canadian Dollar fee, or both.

It's important to understand that your bank will get an excellent exchange rate when it converts currency for you. They will use the AMEX, Mastercard or Visa wholesale rate which is almost at the spot rate for a currency market.

Whilst this is great of course, a bank will then likely charge you a non-Canadian Dollar exchange fee. So it's worth looking into a travel credit card instead, where fees aren't added and you still get excellent exchange rates.

What is a travel credit card?

If you travel abroad frequently, then a travel credit card is a worthy tool to have. They offer excellent exchange rates and waive fees usually incurred by standard credit cards or banks.

You can usually use standard credit cards, or a debit card abroad. But you will likely incur fees to do so. This could be a non-Canadian Dollar transaction fee. If withdrawing cash, an ATM fee may apply and you will likely incur interest using a standard credit card.

FAQs

A good alternative, a prepaid travel card allows you to top them up with a currency of your choice. You can even secure an exchange rate in advance. Whilst some cards have large fees, there are many options available. You can read more here.

A travel credit card will allow you to withdraw cash. You may still have to pay an ATM fee, and there will likely be interest charged from the date of withdrawal to when you pay it off.

You could of course exchange currency at your local currency conversion store or at the airport before you travel. Both may charge you a commission fee, and are unlikely to offer a better exchange rate than a travel credit card.

Essential information

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