Preparing to leave for a week's holiday in Florida recently, I went to my local Bank of Montreal branch to buy U.S. currency. With the Canadian and American dollars roughly at par, I'd decided to use mainly cash on my holiday to avoid paying the foreign currency conversion fee that's applied to Canadian credit card transactions made in foreign currencies.
What's a "foreign currency conversion fee" you ask?
Like many people, until recently, I didn't know that, when the credit card bill arrives from your American holiday (or online purchase), the prices you see converted into Canadian dollars include not just the exchange rate difference, but also this foreign currency conversion fee. So, for example, when I paid the rent for the Florida condo in US$ with my MasterCard, $30 of the C$99.27 differential was for this foreign currency conversion fee. Before leaving, I called several institutions, since I have several credit cards, to see if any offered a better rate than the others, but they were all charging the same 2.5%.
While I was buying my US dollars, a teller at the bank told me about its US$ credit card. These are Canadian credit cards that don't charge a foreign currency conversion fee because they bill in US$ and are payable in US$. What you pay at the till in the U.S. is what you see on your credit card statement. You pay only the exchange rate differential when you pay your bill.
It sounded good, so I let her sign me up. The card arrived by courier a few days later.
Unfortunately, I'd already paid the rent on the condo, but we still "saved" money on the rest of our holiday spending. (It was some consolation when we were ransacking the outlet mall.) And since I go to the US a few times a year, and buy online several times as well, I expect to save more than the US$25 annual fee charged by the card.
Yes, there's an annual fee, but in the case of Bank of Montreal, it's only US$25, and the bank waived it for the first year. A US$25 annual fee means that, if I spend more than US$1,000 per year, I save money.
Paying the bill is simple. If I'd had a US$ account with BMO, I could have paid it online, but since I don't I simply went to the local branch. I used some U.S. currency I had left from my holiday and the teller converted the balance to a figure in C$, which I handed over in cash.
I've learned that other banks have these cards as well, though the annual fees vary. I suggest going online to check the annual fee for the US$ card at a few financial institutions to find the best price, and apply at your local branch so you can negotiate a waiver of the first year fee.
If you spend more than $1,000 a year in $US credit card purchases, easy to do if you're a snowbird, one of these cards can save you money.
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