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WKN: 850576 | ISIN: CA1360691010 | Ticker-Symbol: CAI
Tradegate
22.11.24
21:11 Uhr
62,72 Euro
-0,12
-0,19 %
1-Jahres-Chart
CANADIAN IMPERIAL BANK OF COMMERCE Chart 1 Jahr
5-Tage-Chart
CANADIAN IMPERIAL BANK OF COMMERCE 5-Tage-Chart
RealtimeGeldBriefZeit
62,5063,1213:04
62,7162,9722.11.
ACCESSWIRE
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CIBC CC: Currency Conversion Demystified: How Travel Credit Cards Handle Foreign Transactions

Finanznachrichten News

TORONTO, ON / ACCESSWIRE / March 7, 2024 / Given how easy it is to make overseas purchases, foreign currency transactions are becoming increasingly common. It's important to understand how these transactions work and what fees are charged so cardholders aren't surprised by the final amount of their foreign transactions.

Here's some important information about foreign currency conversion and travel credit cards in Canada.

Understanding foreign transactions

Foreign transactions occur when an individual uses their credit card for a purchase in a currency different from that of their country of residence. Whether someone is making a purchase overseas while traveling or buying online from a foreign merchant, foreign transactions are a regular, everyday part of banking.

In Canada, a foreign transaction is considered as any instance where a person makes a purchase on their Canadian credit card in a currency that isn't Canadian dollars (CAD). Making an online purchase from a US company that charges only US dollars (USD) is a foreign purchase.

How foreign transactions are processed by banks and credit card companies

A foreign transaction fee is a fee the credit card issuer adds to a purchase made in a foreign currency. It's different from an exchange rate and is added on top of the exchange rate. Essentially, foreign transaction fees cover the price of converting transactions back into Canadian dollars. When calculating the exchange rate, the credit card issuer will use the daily exchange rate to convert any foreign currency transactions into Canadian dollars.

In Canada, most credit card companies charge a standard foreign transaction fee of 2.5%, meaning that the total of someone's foreign purchase will have 2.5% added on top of the base charge. In dollar amounts, for every $100 Canadian spent, the typical credit card company will charge $2.50 in foreign transaction fees. However, credit card companies may charge a transaction fee of between 1% and 3%.

Additional fees on top of the foreign transaction fee may also be charged for using a credit card at a foreign ATM.

What are exchange rates and currency conversions?

An exchange rate is the rate at which the currency in one country will be exchanged for another currency. For example, $1 Canadian is not equal to $1 US. So, if the exchange rate between Canada and the US is $1 Canadian to $0.74 US (or around 74 cents), this means that one Canadian dollar is worth 74 US cents.

Currency conversion, on the other hand, is the process of exchanging one currency for another. Credit cards make this process simpler by automatically doing the conversion for cardholders, using the exchange rate on the day of the purchase. This is necessary because exchange rates change daily.

Depending on what currency it's being changed to, $1 Canadian may convert to a higher or lower value than what a Canadian dollar is worth domestically.

Minimizing fees with travel credit cards

Carrying more than one credit card while travelling can help to minimize the fees associated with travel credit cards. Cardholders will benefit by remembering:

  • It pays to plan ahead and budget for exchange rates and foreign transaction fees.

  • There are Canadian credit cards available that do not have foreign transaction fees but may have an annual fee.

  • Purchasing on your credit card can be a great idea if you want additional purchase protection, as your credit card company may be able to help you dispute charges in cases where merchants won't help you.

  • Some merchants may also charge fees for using credit cards, so it's a good idea to plan ahead by having cash to cover some expenses while travelling.

Finally, when travelling abroad, if given the option of whether to pay in Canadian currency or the local currency, always choose the local currency as the payment processor sets the exchange rate. If someone opts to pay in Canadian currency, the retailer sets the exchange rate, and it is often inflated.

Understanding exchange rates, foreign transactions, and foreign transaction fees can go a long way towards budgeting and can save you from owing unexpected amounts on your travel credit card.

CONTACT:

Sonakshi Murze
Manager
sonakshi.murze@iquanti.com

SOURCE: CIBC CC



View the original press release on accesswire.com

© 2024 ACCESSWIRE
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