News Update

FCAC encourages consumers to understand credit card fees before travelling abroad


Agency updates its Credit Cards and You interactive tool

Financial Consumer Agency of Canada (FCAC) released the latest update to its Credit Cards and You comparison tool. This tool compares over 200 credit cards, allowing consumers to easily select the one that best suits their needs based on annual fees, interest rates, rewards, benefits and more.

FCAC is encouraging consumers to be aware of all the fees associated with their credit cards. Consumers should understand how all fees are calculated, especially individuals who are planning on making purchases or taking cash advances with their credit cards while travelling abroad.

"It is important to understand that extra credit card fees will occur when you are vacationing in another country," says FCAC Commissioner Ursula Menke. "Canadians need to understand these foreign exchange and cash advance fees in order to budget for their travel expenses and determine their best course of action for making purchases abroad or withdrawing funds."

Most financial institutions charge between 1.8 2.5 percent in conversion fees on top of the exchange rate for each purchase made in a foreign currency. Each credit card issuer decides its own foreign conversion fees, based on its own criteria. The foreign conversion fee for any credit card is indicated in the credit card agreement.

Consumers should be aware that cash advances made using a credit card are also charged a conversion fee on top of the usual cash advance fee and that interest rates begin accruing right away. The cash advance fee is set by the financial institution and can be either a fixed amount, from $1 to $5, or a percentage of the withdrawal, usually 1 to 4 percent.

If a credit card is used 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 the account, or it will first be converted into U.S. dollars and then into Canadian dollars before it appears on the account.

Consumers should also know that they are protected from unauthorized transactions when they use a personal credit card while travelling abroad. Safety features, like the Zero Liability or fraud protection guarantee, mean that cardholders are not held responsible for purchases made on their personal credit card if it is stolen, and will still be protected on the road. Zero Liability does not apply to commercial credit cards, something that individuals who are out of the country on business should keep in mind. Consumers should verify with their credit card issuer for exact details on these policies.

"There is a lot to consider when it comes to using your credit card while travelling abroad," explains Commissioner Menke. "To learn more about foreign conversion and cash advance fees, I invite consumers to read our booklet called Service Fees on Credit Card Transactions. I also encourage consumers to use our interactive tool if they are shopping around for a new credit card, so that they can pick the one that best suits their needs."