Financial Consumer Agency of Canada
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Credit Cards and You: Service Fees on Credit Card Transactions
Fees for converting foreign transactions into Canadian currency
If you use your credit card outside of Canada , the credit card issuer charges you a conversion fee, as well as the exchange rate, when you make a purchase. Depending on the card issuer, the conversion fee varies from 1.8 to 2.9 percent of the amount of the transaction. Each credit card issuer decides its own foreign conversion fees, based on its own criteria. The foreign conversion fee for your credit card is indicated in your credit card agreement.
Transaction fee charged to financial institutions
When you make a transaction in another country using your credit card, Visa or MasterCard convert your transaction using a wholesale exchange rate. Then, they charge the financial institution that issues the credit card, such as a bank, a foreign currency transaction fee of 1 percent.
Conversion fee charged to consumers
Financial institutions that issue credit cards typically charge you a conversion fee that ranges from 1.8 to 2.9 percent. Financial institutions apply this fee to the wholesale exchange rate they receive from Visa or MasterCard. This means that consumers typically pay 1.8 to 2.9 percent more than Visa or MasterCard's wholesale exchange rate.
It is important to note that currency rates fluctuate on a daily basis. For more details, ask your card issuer about their practice.
If you use your credit card to make a purchase or to obtain a cash advance in a foreign country, the foreign currency will either be converted directly into Canadian dollars, before it is recorded on your account, or it will first be converted into U.S. dollars and then into Canadian dollars, before it appears on your account.
The foreign currency exchange process varies from one credit card issuer to another, and also depends on which foreign currency is being exchanged. Make sure you understand all of the terms and conditions for any foreign currency exchanges that you make with your credit card, since rates can vary from one credit card issuer to another.
The following table shows the impact that a credit card issuer's foreign currency transaction fee can have on a purchase, when the amount of the purchase is converted directly from one country's currency to another. In this example, U.S. dollars were changed into Canadian dollars.
Example:
Ms. Dubois made a purchase in the U.S. of $1,000 with her credit card, on September 17, 2007.
| Example – U.S. dollars converted to Canadian dollars | |
|---|---|
| Amount of purchase | US$1,000.00 |
| Exchange rate: U.S. dollars to Canadian dollars | 1.021961 |
| Value of purchase in Canadian dollars | C$1,021.96 |
| Conversion fee: 2.5% | C$25.55 |
| Total cost of the transaction | C$1047.51 |
Ms. Dubois will have to pay $1,047.51 in Canadian dollars for her purchase in U.S. dollars. This includes both the conversion fee and the exchange rate. The purchase would appear on her credit card statement as follows.
| Original amount of purchase | Exchange rate | Converted amount ($C) |
|---|---|---|
| $1,000.00 | 1.04751 | $1,047.51 |
The following table shows the impact of a credit card issuer's foreign currency transaction fee on a purchase, when the foreign currency is not converted directly into Canadian dollars. In this example, the purchase, which was made in Euros, was first converted into U.S. dollars, then was converted into Canadian dollars.
| Example – Euros converted to U.S. dollars then converted to Canadian dollars | |
|---|---|
| Amount of purchase | 100.00 Euros |
| Exchange rate: Euros to U.S. dollars | 0.71852 |
| Conversion of purchase from Euros into U.S. dollars | US$139.18 |
| Exchange rate: U.S. dollars to Canadian dollars | 1.021961 |
Conversion of U.S. dollars into Canadian dollars |
C$142.23 |
| Conversion fee: 2.5% | C$3.56 |
| Total cost of the transaction | C$142.23 + C$3.56 = C$145.79 |
For her purchase in Euros, Ms. Dubois will have to pay $145.79 in Canadian dollars, which includes the exchange rates for converting Euros into U.S. dollars, and then from U.S. dollars into Canadian dollars, as well as a one-time conversion fee of 2.5 percent which is applied after the purchase is converted to Canadian dollars. The purchase would appear on her credit card statement as follows.
| Original amount of purchase | Exchange rate | Converted amount ($C) |
|---|---|---|
| 100.00 Euros | 1.45790 | $145.79 |
Note: if you use your credit card to make an out-of-country transaction and you decide to return the merchandise and get a refund from the merchant, the dollar amount of the two transactions may not be the same. This is because the exchange rate fluctuates from day to day, and the exchange rate may have been different on the date the refund was processed, than on the original transaction date.
