Skip to main content

A big bank has found it’s good business to help customers avoid one of the sneakiest credit card fees of them all.

Starting Aug. 1, Bank of Nova Scotia will offer a second credit card for retail clients that does not charge the usual 2.5-per-cent markup on purchases made in foreign currencies. The revamped Scotia Gold American Express card will join the popular Scotia Passport Visa Infinite card, which was launched in March, 2018.

The big banks compete hard against each other, yet there’s often a sameness to their product lineups that can force customers to make buying decisions based on details rather than substance. Scotiabank’s decision to go big on cards that don’t apply forex fees is a welcome exception.

“Our object is to deliver more value to our customers by not charging that 2.5-per-cent FX fee, unlike all the rest of the major banks,” said Brett Mooney, senior vice-president of credit cards at Scotiabank.

Beyond Scotia, the RewardsCanada website’s listing of “true no foreign transaction fee cards” includes the Home Trust Preferred Visa, as well as a trio of Mastercards from both HSBC Canada and Brim Financial, a new player. Several other cards offer high rewards on foreign purchases that more than offset the forex fee.

Mr. Mooney said Scotiabank has seen an upward spike of almost 60 per cent in signups for its cards with no foreign transaction fees this year over last – there’s a version of Scotia Passport Visa Infinite for businesses as well. These are cards that earn their popularity the hard way – by providing value.

Scotiabank clients with cards that don’t charge the foreign transaction fee are saving $150 a year on average, Mr. Mooney said. The top 5 per cent of spenders are saving more than $1,000 a year. Even the average savings would offset the annual fee for Scotia Passport Visa Infinite at $139 a year (includes one supplementary card).

The federal Financial Consumer Agency of Canada includes a section on foreign currency conversion charges in its Understanding Credit Card Fees publication. An example is provided where a purchase of something that cost €1,000 works out to $1,422.31 in Canadian dollars. The 2.5-per-cent forex fee amounts to $35.56, bringing the total cost of the purchase to $1,457.87.

For cardholders, eliminating the foreign transactions fees means saving money. For banks, it means forgoing revenue by not charging a fee that is invisible to cardholders who don’t read the fine print in their contracts. This helps explain why Scotiabank hasn’t been widely copied in offering cards without these fees.

The bank doesn’t seem to be cutting corners on the card, though. RewardsCanada founder Patrick Sojka called Scotia Passport Visa Infinite “well rounded” in a review and ranked it the top travel-points card. The card also appears on “best” lists from MoneySense, and Scotia Gold American Express also makes some of these lists.

Mr. Mooney confirmed the bank is using the same exchange costs when converting foreign currencies to Canadian dollars as on other Scotiabank cards that apply the 2.5-per-cent markup. The benefits of the Scotia Passport Visa Infinite card are reasonably competitive. You get two reward points for every dollar spent on groceries, dining, entertainment and daily transit, and one point for other eligible purchases. There’s also travel emergency medical coverage plus various types of travel insurance and complimentary airport lounge access.

The niche of travel reward credit cards with no foreign transaction fee was developed years ago by Chase Canada. Two of its most notable cards were the Amazon Rewards Visa and Marriott Rewards Premier Visa cards, both of which were shut down around the same time last year that Scotia Passport Visa Infinite appeared. Chase was the local arm of a big bank based in the United States, where foreign transaction fees are not as common.

Today, zero forex-fee cards are on the upswing. Advice for people who choose a card because it offers this feature: Watch for other perks disappearing or being chipped away at in the future to help offset the lost fee revenue, notably a reduction in points-earning potential. It’s a basic marketing trick in banking to help a card get established in the marketplace by offering a generous package of features and then paring back on benefits later.

Stay informed about your money. We have a newsletter from personal finance columnist Rob Carrick. Sign up today.

Report an error

Editorial code of conduct

Tickers mentioned in this story