Frugal Approaches to Foreign Currency Exchange

foreign crrency

Frugality and efficiency go hand in hand. Us frugal folk – we’re weird, you see. We overbuy discounted things in bulk to save money and time in the future. We frequently talk the shortest route walking anywhere because any additional step would be inefficient. We are minimalists with little clutter (or at least we aspire to to be).

But one area where efficiency is simply difficult to achieve is when we shop elsewhere – specifically in other currencies. Left and right, the ability to transact in a currency other than the Canadian dollar is provided at sometimes ridiculous premiums of up to 10%.

The solutions, especially here in Canada, are few and far between, but luckily there are some hacks that are available to us that can save us hundreds of dollars down the road. Let me explain:

No Forex Fee Credit Cards

I received the news that my Chase Amazon VISA card was being canceled earlier this year. This was especially upsetting since it was my go-to no forex fee credit card which I had used on every international trip since 2015.

No Forex

In case you didn’t know, most credit cards charge a 2.5% foreign exchange fee on every dollar after conversion. What this means is if you spent $100 in USD and for simplicity’s sake, that translated to $125 CAD, you get topped up with a 2.5% fee on the CAD amount. While 2.5 cents per dollar in surcharge may not appear obscene from the small sample size, it quickly adds up.

In the last 2 years, I spent around $9,230 CAD in foreign transactions (Icelandic Krona, British pound, Japanese yen, USD),  related to travel. By using my no forex fee card, I saved roughly $230 in additional fees. Furthermore, VISA’s forex rates typically beat what you can get at a bank or foreign currency exchange store by a sizeable amount, especially once you include any cash back rewards the card provides.

Despite Chase no longer offering the no forex fee Amazon card, there is still hope elsewhere. Specifically, the HomeTrust Preferred VISA offers no forex fee and no annual fee plus 1% cash back (expect long waits to get your card, though). Alternatively, the Rogers Platinum Mastercard provides a net 1.5% cash back on foreign transactions with a $29 annual fee (waived in year 1) and the catch that cash back must be used on Rogers product/bills.

In any case, a no forex fee credit card is worth it. They say if you save the pennies, the dollars will take care of themselves. It’s especially true when it comes to foreign currency exchange.

Dollar Cost-Averaging the Exchange Rate

I wrote about dollar-cost averaging in a previous post. It’s a concept that not only can apply to investing, but to currency exchange as well.


The theory goes is by buying the same dollar amount of something, you slowly accumulate that particular asset at its average price. The lower cost the asset, the more units you purchase, whereas the higher cost the asset, the less you buy. You can apply this concept to currency exchange, especially if you have time on your hands.

This strategy may not be particularly effective if you’re looking to take a small sojourn to another country, but if you’re a Canadian who is looking to accumulate USD for the long term, the dollar-cost averaging approach is a effective way to grow your USD while mitigating downside risk. You can buy $X once a month, once a quarter, or once a year. Either way, you offer yourself some protection when it comes to any massive fluctuations in rates.

Tip: Technically, using a VISA card with no forex fees would also allow you dollar-cost average the exchange rate because technically your vacation purchases happen incrementally over the course of your trip!

Avoid the Major Banks


This is a no-brainer. The big banks all charge outrageous fees and currency exchange is no different. When I was hunting for the Japanese yen for my trip to Japan, my bank was charging an extra $.08 cents per dollar compared to the VISA exchange rate.

If you really need the cash, sometimes the best way is to explore the local currency exchange shops. Notably, Calforex offers you the ability to return up to 50% of your currency at the rate you purchased it at, so long as you withdrew over $1000 and return the over half within 30 days. Try getting that deal at a major bank.

Avoiding Cash Altogether

But above all else, why not avoid cash altogether? Especially if you’re visiting nations that have a higher chance of accepting card.

After learning the hard way in Iceland where literally every vendor accepted VISA (I could have gotten away using zero cash), I decided on my next trip to London, England to bring only one £20 note and try and use VISA everywhere else. Suffice to say, I had to withdraw another £30 later in the week from an ATM (at no transaction fee, of course) once there, but that tactic did me just fine.

Since we live in an increasingly cashless society, do your research first to see how cash heavy that particular country or city is. If the verdict is you need cash, get cash. If the verdict is they take card almost everywhere, you can avoid the hassle of cash.

Plus, you don’t have to be consistently paranoid about the wads of bills in your luggage.

Final Pro Tip: If you don’t want to return any leftover cash once back home, at the end of your trip, try and use all of it. Usually at the airport, I’ll have a few coins left so I’ll trek over to the coffee store and use the coin and pay the balance on card. Just one way to avoid the opportunity cost of dead cash!

Author: stretchingeverydollar

Starving artist to Debt Free MBA. Attempting to retire early.

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