Picture this: you check your credit card statement after an international business trip, and all your purchases are a bit more expensive than you remember. The cause of that unexpected bottom line is almost certainly the foreign transaction, or FX, fees that were added to most of your transactions as well as every time you changed money. If you used your credit card for most of your transactions, all those fees can add up. Understanding FX fees and how to avoid them is a great way to save money anytime you go to another country for business travel.
How FX Fees Work
An FX fee is a fee charged by your credit card issuer for any purchases you put on that card while you’re in a foreign country. If you buy something online from a company in another country that handles transactions in a different currency, your card issuer could also charge you an FX fee for that.
While FX fees vary by card issuer, the standard amount is 2.5%, and the fee is often combined with the original price of the transaction on your monthly statement. You can find the exact amount in the terms and conditions for your credit card. FX fees have become less popular in the United States, with many popular cards offering no FX fees, but they’re still commonplace in Canada. One reason why is that Canadians travel more than Americans, with 67% of Canadians having passports and only 36% of Americans, making FX fees a much larger source of revenue for card issuers here.
It’s important not to confuse FX fees with currency conversion fees. Some businesses offer to convert a purchase from their currency to your own. Since you’re still making a foreign transaction, you incur the FX fee even with currency conversion. It’s generally best to decline any currency conversion offers, as you get a better conversion rate through your card issuer.
Avoiding FX Fees to Reduce Business Travel Expenses
Credit cards are ideal for business travel, as they offer consumer protections and help you avoid carrying lots of cash around. FX fees can eat into your budget, though, making it best to choose a credit card without them.
While most Canadian card issuers charge FX fees for business travel credit cards, you can find a card with no FX fees if you shop around. Make sure to account for any rewards a card offers, as these can offset fees. For example, certain cards have FX fees but also earn a cashback rate on foreign transactions that’s greater than the fee.
Try to apply for a card with at least a month or two to spare before your next business trip. It can take some time for the card issuer to process your application and get your card mailed out to you, and it takes even longer if you get declined for one card and need to apply for another. If you’re unsure how good your credit is, you can check it by requesting free credit reports from Equifax Canada and TransUnion Canada.
As consumers flock toward credit cards with no FX fees, these types of cards should become more common. Until then, there are a few options available to make international travel easier on your wallet.