Card Costs, Comparison and 2026 Rules
Foreign transaction fees on Canadian credit cards: what they cost and how to avoid them
How foreign currency purchases are converted on Canadian credit cards, the percentage fee many cards add, dynamic currency conversion and refunds, with illustrative examples.
When you pay in a foreign currency with a Canadian credit card, the card network converts the amount to Canadian dollars and many cards then add a foreign transaction fee, commonly in the range of about 2.5% of the converted amount (check your own card's information box, because the fee and method vary). That fee usually wipes out the rewards on those purchases: on a card that earns 1%, a 2.5% fee leaves you about 1.5% worse off than paying with a card that has no such fee. The fee also applies to many online purchases from merchants that bill in another currency, even if you never leave Canada.
This guide belongs to the cashback versus points overview. Fees and exchange rates are illustrative.
How the conversion works
- The merchant charges an amount in its currency, for example US dollars or euros.
- The card network (Visa, Mastercard, American Express and others) converts it to Canadian dollars at its rate for that day or processing date.
- The issuer adds its foreign transaction fee, a percentage of the converted amount, either as a separate line or built into the converted amount on the statement.
Under the Financial Consumer Protection Framework Regulations, a bank's credit card application information box must state how foreign currency transactions are converted, so the method and fee are in the box. See disclosure rules.
Illustrative cost over a year
A household spends $6,000 a year (in Canadian-dollar terms) in foreign currencies: a one-week trip to the United States and some online purchases from foreign sellers.
| Card | Fee | Rewards on the foreign spending | Net |
|---|---|---|---|
| 1% cashback, 2.5% foreign transaction fee | $6,000 × 2.5% = $150 | about $61.50 (1% of $6,150 if the fee earns rewards) or $60 | about −$89 |
| 1% cashback, no foreign transaction fee | $0 | $60 | +$60 |
| 2 points per dollar on foreign spending at 1 cent a point, 2.5% fee | $150 | $120 to $123 | about −$27 to −$30 |
The difference between the first two cards is about $149 a year for this household. Whether a card without the fee is worth an annual fee depends on how much you spend abroad: at a 2.5% fee, every $1,000 of foreign spending costs $25, so a $120 annual fee is covered at $4,800 of foreign spending, before counting any other benefits.
Dynamic currency conversion: decline it
Abroad, a card terminal or website may offer to charge you in Canadian dollars instead of the local currency. This is dynamic currency conversion, run by the merchant's provider, not your card network. The rate offered often includes a margin above the network rate. Your issuer may still treat the transaction as foreign and add its fee as well. Unless you have checked that the offer is better, choose to pay in the local currency.
Refunds, holds and timing
- Refunds in a foreign currency are converted on the date the refund is processed, at that day's rate. If the Canadian dollar has moved, the refund may be less (or more) than the original charge, and some cards do not refund the original foreign transaction fee. Check your agreement.
- Holds for hotels, car rentals and fuel pumps can tie up part of your credit limit. Under the Bank Act, a bank may not charge you an over-limit fee caused only by a hold, unless you would have exceeded the limit anyway.
- Posting dates can differ from purchase dates, so the exchange rate may be the rate on the processing day.
Online purchases from foreign merchants
Fees apply based on the currency of the charge and, at some issuers, on where the merchant is located or processes the payment. A site that shows prices in Canadian dollars but processes through a foreign entity can still trigger a fee on some cards. If you shop often from foreign sellers, review a statement to see which charges carried a fee.
Remember that imports may also attract GST/HST, provincial sales tax and duties, collected by the courier or Canada Post. Those are not card fees, but they change the real cost of a foreign purchase.
Ways to reduce foreign currency costs
- Use a card with no foreign transaction fee for foreign spending and your main rewards card at home.
- Compare against alternatives such as a multi-currency account or a prepaid travel card, looking at the exchange margin and any fees.
- Avoid cash advances abroad: a cash withdrawal on a credit card usually costs a cash advance fee, interest from the day of withdrawal and possibly a foreign transaction fee. A debit card may be cheaper, depending on your bank's foreign ATM fees.
- Tell your issuer about travel if it asks, and carry a second card in case the first is blocked for suspected fraud.
Frequently asked questions
Does a foreign transaction fee apply to purchases in US dollars inside Canada?
If the charge is processed in a foreign currency, typically yes. Purchases charged in Canadian dollars normally are not, though issuers' rules differ.
Do rewards apply to the foreign transaction fee?
It depends on the program. Many programs exclude fees and interest from earning rewards.
Is the network exchange rate the same as the bank's posted rate?
Not necessarily. Network rates are set by the network for card transactions; your bank's posted cash or transfer rates are separate.
Can a merchant add a surcharge on top?
Outside Quebec, a merchant may add a disclosed surcharge on credit card payments within network rules; see interchange fees and surcharges. Abroad, local rules apply.
Sources
- Justice Laws Website — Financial Consumer Protection Framework Regulations s. 59 (foreign currency conversion in the information box); Bank Act s. 627.36 (holds)
- Financial Consumer Agency of Canada — using payment cards when travelling
- Canada Border Services Agency — duties and taxes on goods imported or bought abroad
