Canadian banks love it when you travel.
When you travel outside Canada and use your credit card or withdraw cash from an ATM, your bank converts the amount you charge or withdraw into Canadian dollars at a fair exchange rate, close to the Bank of Canada rate, but then adds 2.5% or more, a foreign exchange (fx) fee, for something that costs the bank almost nothing. And for an ATM withdrawal, in addition to the fx fee, most Canadian banks charge a transaction fee for using a foreign ATM.
You can avoid both fees.
Credit cards: the best deals at the moment (October 2019) are the the Home Trust Preferred Visa card and the Rogers Platinum Mastercard (or better, the Rogers Elite card if you qualify). These cards either don’t charge fx or refund it in the form of extra cash back on foreign purchases. The Greedy Rates website has an article comparing the Canadian credit cards that offer the best fx deals—check it for the latest information. Keep in mind that cards offering good fx deals may not offer many extras. I use my regular bank card to buy airline tickets, no matter what currency, as it offers travel perks such as travel delay and lost luggage insurance. But for everyday purchases when I’m away from home, I use my Rogers card.
Note that within the EU your foreign credit card may be refused. This won’t happen in popular tourist towns but may elsewhere. Keep some cash on hand. (The reason is that all banks charge merchants a processing fee for each credit card transaction. The EU limits that fee to just 0.3%. This limit doesn’t apply to non-EU cards. Canadian and other foreign banks charge merchants much more. Touristy places have adjusted their prices to account for tourists and charge higher prices; off the tourist path merchants expect EU cards, don’t charge inflated prices, and may refuse the extra cost of accepting a foreign card.)
ATM: When you make an ATM cash withdrawal outside of Canada your bank will add a 2.5% or more fx fee, the same one it adds to credit card purchases, and it may add an ATM transaction fee. You can avoid cash withdrawal fx fees and ATM fees with a novel prepaid credit card from Stack, a Toronto-based firm appealing to millennials and, oddly, to an old traveler like me. You must add funds to the Stack card before you can use it (it is a prepaid card) but that’s easy as Stack takes Interac transfers. With my iPhone I use my banking app to make an Interac transfer to the Stack card, ten minutes later see it in the Stack app, then I withdraw it without any fees or fx. That’s a free pint of beer or more every time you get some cash!
At home: I like to have some foreign currency with me at the start of a trip. I haven’t found a way to buy it in Canada without an exchange fee, but rates vary. Airport currency exchanges are the worst place to buy foreign currency—your bank will charge less. Specialty currency exchanges such as the Vancouver Bullion and Currency Exchange (recommended) have better rates than your bank.
Anyone found other good ways to save money on currency exchange fees? Please use the comments. Thanks to Danelle for pointing out the new rates on the Home Trust card.