Updated December 6, 2022

Ask the question in travel forums, “What is the best credit card for travelling abroad?” and answers invariably suggest those that don’t charge foreign transaction fees (FOREX or FX). Is a no-FOREX-fee credit card always the best choice for international travel? When might a no-FOREX-fee credit card NOT be the wisest choice as a travel credit card?

What is a no-FOREX-fee credit card?

FOREX (or FX) stands for foreign transaction. When purchases that pass through a foreign bank or are in a currency other than your home currency, they attract a FOREX fee charged by credit card issuers. They typically range from 1% to 3% of the transaction.

In Canada, the fee is 2.5%.

It consists of two parts: a network or currency conversion fee charged by the network (e.g., Visa or MasterCard) and a bank fee charged by the respective financial institution.

Image from quoteinspector.com

Some banks waive both components with a no-FOREX-fee credit card. These gems are more prevalent in the USA than in Canada.

What is the best credit card for international travel?

Ask this question in miles-and-points forums and the inevitable response is “Whatever card helps you meet the MSR.” The MSR, or Minimum Spend Requirement, is the spending threshold that needs to be met to unlock a sign-up bonus.

At any one time, there are multiple sign-up offers (and in some cases, product switches with full promotional benefits), on a host of credit cards. Here’s an example of an existing offer on a TD Aeroplan Visa Infinite Card promotion ending January 3, 2023.

• 10,000 Aeroplan points on the first purchase
• 20,000 Aeroplan points on a $1,500 spend within 90 days of account opening
• 20,000 points on spending $7,500 within 12 months of account opening
• NEXUS fee rebate every 48 months
• annual fee rebate in the first year

According to Prince of Travel, this represents a value of $662 in the first year.

Should your travel wallet include a no-FOREX-fee credit card?

Yes, when it’s to your advantage. There will be occasions, both at home and abroad, when saving the 2.5% FX fee is the best play.

For example, I use my no-FX-fee credit card for cross-border shopping for discounted audiobooks quoted in US funds. If I’m not working on a Minimum Spend Requirement, I’ll use it for subscriptions or other products quoted in US Dollars. I’ll also use it, on occasion, while travelling abroad.

But, is a no-FX-fee credit card always the best credit card to use when travelling abroad?

When might a no-FOREX-fee credit card not be the best choice as a travel card?

A no-FX-fee credit card isn’t the best choice for international travel when greater value can be extracted by using another credit card. While saving 2.5% on foreign purchases holds some appeal, it might not return the best value.

There are other considerations: earning on spending, and earning on sign-up bonuses. When earning on spending or earning on sign-up bonuses exceeds a 2.5% return (plus points earned on spending), a no-FX-fee card might as well stay in your wallet.

Crunching the numbers

Let’s say you have a trip budget of $5,000. How can you maximize the return on a $5,000 spend?

1. Meeting Minimum Spend Requirements (MSR)

One way is to use trip expenses to meet the MSR for an attractive sign-up bonus on one or more credit cards. Taking advantage of a first-year-free offer increases the value.

Do the math to evaluate whether or not relying on a no-FX fee card is the best route. As a starting point, the 2.5%-FOREX fee on $5,000 is $125.

Image by Marco Verch, Creative Commons

I’ll use two Canadian credit cards to crunch the numbers but the evaluation process remains the same.

For example, two no-FOREX-fee credit cards in Canada are issued by Scotiabank and earn Scene+ points: the Scotiabank Gold American Express Card and the Scotiabank Passport Visa Infinite.

When redeemed for travel, one Scene+ point is worth one cent. 

How many Scene+ are earned on a $5,000 spend (in a foreign currency)? For the Scotiabank Gold American Express Card, it’s 5,000 Scene+ on any expenses in a currency other than Canadian Dollars (CAD). These have a redemption value of $50 (for travel). When combined with your $125 saved on FX fees, your net gain is $175.

With the x2 points’ multiplier on groceries, dining, entertainment, and daily transit purchases on the Scotiabank Passport Visa Infinite, the base earnings of 5,000 points might increase to 7,500. These have a redemption value of $75. Your net gain is $200.

 

For more information on the Scene+ program, see What’s the best use of Scene+ (formerly Scotia Rewards) when travelling the world on miles and points? 

 

Let’s say you choose to invest that same $5,000 to meet the MSR on one or more credit cards. At any one time, you’d have a choice of several credit card offers, many with an enhanced sign-up bonus and a possible annual fee rebate in the first year. Most of them would far exceed $175/$200 in value.

Without taking into consideration benefits such as insurance and lounge access, here is an example of a credit card that would generate a much better return than a $175 or $200 value.

As mentioned earlier, The TD Aeroplan Visa Infinite offer (ending January 3, 2023) earns 50,000 Aeroplan points (10,000 on the first purchase, 20,000 on a $1,500 spend in the first 90 days, and 20,000 on an annual spend of $7,500). Not taking the card’s points multipliers into consideration (x1.5 on gas, groceries, and at Air Canada), meeting the spending thresholds alone results in 59,000 Aeroplan points. According to Prince of Travel, an Aeroplan point is valued at 2.1 cents per point. However, I’ve found that much greater value can be extracted by redeeming points for flights in premium cabins.

Add one or two other cards with similar offers to your wallet and the benefits far exceed $175/$200 in value.

2. Points’ multipliers in other reward currencies

How else can you maximize the number of points earned on trip expenses? Consider all loyalty programs within your miles-and-points portfolio to determine the best return.

Using the Scotiabank example, this means looking at credit cards earning better multiplier bonuses in reward currencies offering greater value than Scene+.

Take the AMEX Cobalt card in Canada. It earns x5 on eats and drinks, x3 on eligible streaming services, and x2 on travel, including transit and taxis. For most people, expenses while travelling fall into the x5 and x2 categories. While the Scotiabank Passport Visa Infinite card earns x2 Scene+ on dining and groceries purchased in a foreign currency, the best value that can be extracted from a Scene+ point is one cent.  

Effective August 16, 2021, the Cobalt’s reward currency changed from Membership Rewards-Select (MR-S) to Membership Rewards (MR). MR are a flexible rewards currency that can be converted to airline partners including Aeroplan and British Airways Avios. Prince of Travel values one MR at 2.1 cents. At this valuation, spending in the eats-and-drinks category abroad will result in up to a 10.5% return, or 8% after taking the 2.5% FX fee into consideration.

While American Express credit cards have a lower acceptance rate in some countries, this isn’t the case in others. Given that the Cobalt card occupies a permanent place in the wallets of many miles-and-points enthusiasts, Rewards Canada curates a crowdsourced list of confirmed multiplier locations around the globe. 

The Cobalt is in my travel wallet and the first card I reach for when purchasing eats, drinks, and travel abroad. 

What is the best credit card for travelling abroad?

If extracting value from credit card purchases is one of your goals, there may be better choices than focussing on the 2.5% savings on a no-FX-fee credit card.

A travel credit card with adequate insurance benefits is more useful if it:

• helps you meet a Minimum Spend Requirement for a compelling sign-up bonus 
• has attractive points multipliers for foreign spending in travel-friendly categories (e.g., travel, dining, groceries, and entertainment)
• earns points in a reward currency and program capable of extracting maximum value for future travel

How do you maximize travel expenses to fund future travel using miles and points? What are your favourite credit cards when travelling abroad?

 

Might you be interested in my other miles-and-points posts?

• What’s the best use of Scene+ (formerly Scotia Rewards) for travelling the world on miles and points?
• Finding Aeroplan flights: a step-by-step guide
• Meeting Minimum Spend Requirements to travel the world on miles and points 
• Lounge and flight review of United Airlines’ Polaris experience
• Is the BMO Air Miles World Elite MasterCard a good deal?
• Travelling the world on miles and points. Is the TD Rewards program worth it?
• Why the Best Western loyalty program is good for travellers
• What is the best credit card for trip cancellation, trip interruption and flight delay insurance for trips on points?

 

Care to pin it for later?