Travel and foreign currency: which credit card to choose?
Paying in a foreign currency often costs more than you think, and the “best travel cards” are not always the best for foreign-currency purchases. Here is how to separate the two questions.
In this guide
Two different questions
“Which card for travel?” actually bundles two distinct needs:
- Paying in foreign currencies without needless extra cost, whether abroad or for online purchases billed in another currency.
- Funding trips with rewards: transferable points, airline or hotel program points, travel-eligible cash back, annual credits and protections.
A card can excel at one and be ordinary at the other. Confusing them leads to choosing a “travel” card that is expensive on every foreign purchase, or a no-FX-fee card that earns almost nothing.
Foreign transaction fees
When a purchase is settled in another currency, the payment network converts it to Canadian dollars at its rate of the day. Most Canadian issuers then add a foreign transaction fee, expressed as a percentage of the purchase and often around 2.5%. On a trip worth a few thousand dollars, these fees easily exceed the value of the rewards earned on those same purchases.
Some cards charge no foreign transaction fee. For someone who regularly spends in foreign currencies, that advantage is often worth more than a few extra points per dollar. This is why Carte IQ asks for your annual foreign-currency spending separately from the other categories: these fees change the ranking, and at equal spending a no-FX-fee card can outrank a card with a higher reward rate.
A useful reflex: when a terminal abroad offers to charge you “in Canadian dollars”, decline. That dynamic currency conversion by the merchant generally applies a worse rate than the network’s.
Travel points: value depends on use
Travel cards differ mostly by their rewards program. Three families coexist in Canada: points transferable to airline or hotel partners, airline program points, and fixed-value points or cash back usable on travel booked through a portal.
The value of a point is not the same from one family to another, nor from one person to another: it depends on how you will redeem. Our guides How much is a reward point really worth?, Should you transfer points or redeem them directly? and Aeroplan vs Membership Rewards vs Scene+ detail these differences.
Carte IQ converts points to dollars at a conservative value specific to each program, based on common redemption methods, so that cards remain comparable.
Insurance and protections: useful, but not priced
Travel cards often include protections: travel medical insurance, trip cancellation, baggage delay, rental car coverage. These are real benefits, but their dollar value depends on your situation, your age, trip length and the insurance you already hold.
Carte IQ does not convert these protections to dollars and does not include them in net value: they are presented as facts to verify on each card’s page and in the issuer’s certificate. This caution avoids justifying an annual fee with a value you may never use.
Acceptance abroad
Visa and Mastercard are widely accepted internationally. American Express is accepted less in several countries, which mirrors the Canadian situation: an American Express card can be excellent for earning, but it is prudent to travel with a Visa or Mastercard alongside. See American Express in Canada: where it is accepted and when it is worth it.
How to decide
- Estimate your annual foreign-currency spending. If it is significant, foreign transaction fees weigh on the decision.
- Estimate your travel spending paid in Canadian dollars (flights, hotels, packages): that is where boosted “travel” rates apply.
- Decide whether you will really use a points program, or whether travel-eligible cash back suits you better.
- Compare net value after annual fees, without counting insurance in dollars.
The best cards for foreign-currency spending and the best cards for travel rankings answer these two questions for a reference scenario; Find my strategy recalculates them with your own amounts, including your foreign-currency spending.
Frequently asked questions
What are foreign transaction fees?
A percentage the issuer adds to every purchase settled in a currency other than the Canadian dollar, on top of the network’s exchange rate. Most Canadian cards charge them; some charge none. Each card’s exact percentage is shown on its card page.
Do I need a travel card with an annual fee to travel?
No. A card with no foreign transaction fee and no annual fee can be enough to pay abroad. A travel card with a fee is justified when its points, credits and insurance, which you will actually use, exceed its fee.
Should I pay in Canadian dollars when a merchant abroad offers it?
Generally not. That merchant-side conversion usually applies a less favourable rate than the payment network’s. Paying in the local currency is usually better.