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Have you wondered what are the best currency exchange options for travellers? It depends on your situation. Some people will want to know about the cheapest way to get cash, while others want to minimize their fees when they need multiple currencies. Which option you choose depends on your personal situation.
The most important thing to understand is that there are different fees involved when exchanging money. If you limit those charges, then that’s more money in your pocket. Since travel restrictions are starting to lift around the world, now is the time to read about the best currency exchange options available to you.
Understanding how foreign exchange works
All currencies have a different value compared to Canadian dollars. For example, as of July 1, 2021, the exchange rate between Canadian and US dollars is .80. That means $1 CAD is worth $.80 USD. On the flip side of things, $1 USD is worth $1.24 CAD. Some people don’t realize that the exchange rate listed on government and currency conversion websites isn’t what you get when you need to convert currency. That’s because those exchange rates don’t factor in any fees.
For example, just about every credit card charges a foreign transaction fee of 2.5%. That means when you make a purchase in any currency besides Canadian dollars; you pay the exchange rate, plus 2.5%. While the fee is reasonable, there’s no denying that it adds up. Generally speaking, you should try to minimize your fees, but sometimes you’ll need to pay more if you’re looking for convenience. The following are what I consider the best currency exchange options.
CIBC AC Conversion Prepaid Card
- Load up to 10 currencies
- 1% cash back on all purchases
- No fees
- $20 bonus when using my exclusive referral link
The CIBC AC Conversion Prepaid Card is a unique product since it allows you to hold 10 different currencies on a single card. Many travellers will find this appealing since they’ll be covered in 45 different countries. The following currencies are what’s available:
- Canadian Dollars – CAD
- United States Dollars – USD
- Euros – EUR
- Great British Pounds – GBP
- Mexican Peso – MXN
- Hong Kong Dollars – HKD
- Australian Dollars – AUD
- Japanese Yen – JPY
- Turkish Lira – TRY
- Swiss Franc – CHF
Since this is a prepaid card, you need to load funds in advance via the CIBC AC Conversion website or as a bill payment through your financial institution’s online portal. Some travellers find this incredibly useful since they’ll know what they’re paying to convert currencies in advance. Interestingly enough, the exchange rates used by the CIBC AC Conversion Prepaid Card are lower compared to exchanging funds in a branch. Because there are limited overhead costs for prepaid cards, CIBC passes on the savings to its users.
In addition, you’ll earn 1% cash back on all purchases, which is a huge perk considering this is a prepaid card. Plus, if you sign up with my exclusive referral link, you’ll get $10 for free.
No foreign transaction fee credit cards
- No foreign transaction fees
- Potentially no foreign transaction fees on ATM withdrawals
- Some cards have no annual fee
As you know, most credit cards charge a foreign transaction fee of 2.5%. However, there are now at least a dozen cards in Canada that waive this fee altogether. This makes no foreign transaction fee credit cards one of the best currency exchange options for travellers.
I personally like the STACK Mastercard since I won’t pay foreign transaction fees on purchases or ATM withdrawals. That said, the operators of some ATMs do charge a one-time fee. STACK just doesn’t charge you when you use your card at an ATM.
Check out my list of the best no foreign transaction fee credit cards in Canada for some other options. Some of the cards listed come with some great perks, such as travel insurance, lounge access, and more.
Use your debit card
- Get local currency immediately
- ATMs are located everywhere
- Reasonable fee
Although credit cards are great, sometimes you’ll need cash when travelling. The easiest way to get the local currency is through an ATM when you arrive. Both VISA and MasterCard have ATM locators, so you can find the right ATM before you even take off.
Getting cash at an ATM is handy since the fee is typically 2.5%-3%, plus any ATM usage fees. If you want to keep your charges down, you could max out your daily limit and just withdraw more money whenever you need it. This isn’t the cheapest solution, but it can sometimes be the most convenient.
Foreign exchange offices
- Get local currency immediately
- You can change multiple currencies
- Exchange rates can be good
Foreign exchange offices are often located in popular tourist areas and airports, so they’re never hard to find. What makes them a good option is that they typically have just about every currency on hand.
If you’re looking to exchange money before you depart, foreign exchange offices can offer good value as long as you do your research. Look for an exchange office where the spread is less than 2.5%. Remember, foreign exchange offices often price their currency based on supply and demand. Just because the exchange rate is great for one currency, that doesn’t mean it’ll be good for another.
While the convenience factor is handy, you really need to pay attention to rates. I’ve seen a lot of people use foreign exchange offices in airports where the markup is close to 10%. That said, during my travels, I found exchange offices in Asian airports to be good. Either way, exchange offices are one of the best currency exchange options since you can swap your money on the spot.
Use your regular bank
- Good rates if exchanging for USD
- Other currencies may have a high markup
- Any currency besides USD may take a few days to arrive
This shouldn’t be a huge surprise, but your bank is one of the best currency exchange options for travellers. They’re easily accessible and have access to almost every currency. While the convenience factor is there, using your bank can sometimes be costly.
For example, when I went to Brazil, I planned to convert about $1,000 before my trip. However, when I went to my bank, they quoted me a rate that was 12% higher than the official rate. I knew this was a ripoff, so I just swapped $50 and took out more from an ATM when I landed.
Interestingly enough, banks and credit unions sometimes have some pretty good rates if you’re swapping for the currency of a neighbouring country. For example, the markup for changing Canadian dollars to USD is relatively low. Keep in mind that Canadian banks don’t typically carry any other currencies besides USD on site. If you need any other type of currency, you need to order it, which could take a few days.
Online exchange companies
- Best choice if you need to send money to another country
- The more you exchange, the lower your fees
- Can’t get cash
If you didn’t know, there are also online companies that offer cheap money exchange. Since they’re entirely digital, they offer some of the best currency exchange options compared to physical locations such as banks or foreign exchange offices. There’s only one “catch,” you usually need to have a bank account in the country you’re exchanging money to. For example, if you want to exchange Canadian dollars for U.S. Dollars, you would need a bank account in Canada and the U.S.
This foreign exchange option wouldn’t work for everyone, but it’s perfect for snowbirds or someone who works in one country and needs to send money to friends or family in another country. In most cases, the larger the sum of money you’re exchanging, the better the exchange rate you’ll get. If this is a fit for you, check out my OFX review and find out how you can exchange your money without paying insane fees. Alternatively, there’s also Simplii Financial’s Global Money Transfer that offers you cash back when you exchange funds.
Norbert’s Gambit
- The cheapest way to convert USD to CAD
- Mainly beneficial to people who need to convert huge amounts
- Requires a discount brokerage account
Norbert’s Gambit is a trick where you can convert huge sums of USD to CAD or vice versa. The way it works may sound complicated, but it’s easy once you figure it out. Basically, you would buy a stock through your discount brokerage that’s available in both CAD and USD dollars. For example, DLR (Horizons U.S. Dollar Currency ETF). First, you buy your shares on the Canadian exchange. When your trade settles, you get your brokerage to journal the shares over to the US side. You’ve now converted your currency to USD at the exact exchange rate. The only thing you pay is the trading fees (if any).
This trick has become incredibly valuable for snowbirds who need a bunch of cash. It can also be a handy way to save on fees if you need to convert currencies for whatever reason. Generally speaking, I would only advise Norbert’s Gambit if you’re exchanging $5,000+. Check out my Norbert’s Gambit guide for more details.
Final thoughts
Picking the best currency exchange options for travellers depends on your situation. I like to keep my costs down, so I typically use a credit card with no foreign transaction fees. Some of my travel buddies like the CIBC AC Conversion Card since they prefer to have multiple currencies available to them.
