Canadian Banks And The Foreign Exchange Shell Game

Recent posts described my search for a Canadian credit card with no Foreign Exchange Transaction Fees.  At the moment there are only five, four if you eliminate HSBC's World Elite MasterCard which is only available to HSBC high income, high net worth clients.

If you enquire at your bank about a credit card that does not charge FX Transaction Fees they'll make you an offer that they think is just soooo great.  They'll offer the full meal deal, a complete package with no FX transaction fees.  Are you ready?  The package includes your existing Canadian bank account and credit card PLUS, through their US subsidiary, a US funds bank account and US funds credit card.  Easy peezy, you use the US card in the States and for online shopping at American sites and make all payments on the US credit card from your US bank account.  Viola, no FX transaction fees!

There's a catch, right?  Sure there is.  If you're a typical Canadian retired boomer/snowbird, eventually you'll have to fund that US bank account.  With what?  A transfer of course.  From your Canadian bank account where all your money is.  And, guess what?  For the transfer they'll be charging today's exchange rate plus, at least 2.5% and as much 4%.  At the end of the day it's exactly the same, or worse, as if you'd used your Canadian credit card and paid the 2.5% FX transaction fee on each and every purchase.  And, by the way, that great banking package they offer comes with a whole set of fees of its own.  Our Canadian banks do love their fees.  I wrote about this way back in 2011 Canadian Banks - We Love 'Em And Hate 'Em

Is there anything one can do?  You bet, it goes right back to the need to source out and obtain at least one of the few Canadian credit cards that do not charge FX transaction fees.

If you're a snowbird and have a vacation home in the US and need a US bank account to pay things like HOA fees, property taxes, utilities etc. you should open your own US account with a US bank. It's easy to find an offering with zero fees when you make it clear you don't want any interest as you sure as heck don't want a wee bit of US interest income to trigger the IRS thing.

Again, you'll be in a position whereby you have to fund that US bank account from time-to-time.  Every bit of research I've done leads to a single solution for this.  The Snowbird Currency Exchange Program offered by the Canadian Snowbirds Association beats all others.  Their once monthly "buy" of thousands of dollars on behalf of their membership results in huge exchange rate savings.  Check it out Snowbird Currency Exchange Program

A Bit More About Canadian Credit Cards and Foreign Exchange Transaction Fees

In the previous post I related my experience with the excellent offering of Chase Canada.  The Amazon.ca Rewards Visa met all of our US shopping needs for five consecutive winters in Arizona.  NO Foreign Exchange Transaction Fees, NO Annual Fee and Cash Back. The cash back was automatically credited to the account each month.  This came to a sudden end last winter when Chase withdrew from the Canadian Credit Card business and closed all accounts on March 15.

So, there we were, in Arizona for the winter needing to source out and apply for a replacement card with no FX Transaction Fees.  As usual, we turned to Professor Google.  This was in early February.  We quickly discovered the Home Trust Preferred Visa card and the Rogers Bank Platinum MasterCard.  A bit of research revealed that both of these had been around for a while.  Curiously, neither were being aggressively promoted.

When introduced, the basic Rogers MasterCard offered filled the bill with No FX Transaction Fees, No Annual Fee and 1.5% Cash Back.  Sometime later, Rogers began charging 2.5% Foreign Exchange Transactions Fees.  They offset this fee by upping the cash back on all FX transactions to 4%.  So, it was a wash, still the equivalent of 1.5% cash back.  A downside for this card is that the cash back accumulates and is applied to the account each January, and then, only is you remember to make the specific request each December.  Note: This info relates to the offering last February.  There have been changes since then.

Alternatively, the Home Trust Preferred Visa was similar.  No FX Transaction Fees, No Annual Fee but with reduced cash back of just 1%.  One difference, while the cash back similarly accumulates throughout the year, it is automatically credited to the January account without the cardholder having to do a thing.

In the end, we choose the Home Trust card with the lower cash back.  The main motivator for this decision was the fact that it's a Visa which is the only card accepted by Costco in the USA.  Yup, the reverse of Costco Canada.  In Arizona, Costco is one of our main shopping destinations for all the usual reasons.

Since February, there has been a couple of new cards introduced which do not apply foreign exchange transaction fees.  Watch for info about these in coming posts.

Canadian Credit Cards With No Foreign Exchange Transaction Fee

I've been away for nearly four years.  They've been four great years. Our real estate investment in Arizona has provided a winter getaway and enabled us to escape Manitoba winters.  2018 was our fifth full winter in Arizona. For us, a full winter is January through April as the practice has been to hang in 'til after Christmas with family.  On Boxing Day we tidy up and it's a run for the border on December 27.  This year may be different as I finally fully retired at the end of 2017.  Thinking maybe we'll get away in early November and possibly return for Christmas...possibly.

We've now joined the legion of Snowbirds who spend a lot of time researching cross border stuff like cell phone roaming costs, US/CA$ exchange rates etc. etc.  I'll post about some of these later on. Today it's about the huge foreign exchange transaction fees charges by Canadian banks.  A minimum of 2.5% and up to 3% or even 3.5% if you're using a "premium Canadian card"!  I wrote about this way back in 2011.  Canadian Banks - We Love 'Em and Hate 'Em 

Four years ago our research sourced out a suite of cards offered by Chase Canada.  Chase had a number of infinity cards with various benefits and annual fees.  In the end, we applied for and received the Chase Canada Amazon.ca Rewards Visa.  It seemed to meet all the requirements:

• NO Foreign Exchange Transaction Fee
• NO Annual Fee
• 1% cash back on all purchases, 2% for purchases made on Amazon.ca

Sometime over the past couple of years Chase Canada stopped offering cards to new applicants.  The writing was on the wall.   One by one Chase not only stopped offering new cards but actually closed the accounts.  The Amazon.ca Rewards card along the the Marriott Rewards card lasted the longest but notice was eventually sent out that these too would come to an end on March 15, 2018.  Chase withdrew from the Canadian credit card business.  So the search was on.

A Google search with the title of this post leads to some very helpful sites and discussions about various credit card offerings.  It's amazing how many Canadians add comments suggesting that they have a bank issued credit card which does not charge FX transaction fees when in fact they're paying at the very least 2.5% over the actual exchange rate.  Just because it doesn't show as a separate amount doesn't mean the bank is not charging it!