In banking and investing, competition sometimes brings lower costs for clients. A case study: Fees associated with using a credit card for expenses outside Canada.
Almost all credit cards add a fee of 2.5 per cent or so on top of the foreign exchange rate on purchases in a foreign currency. Some money-saving alternatives that have emerged include a growing number of credit cards and prepaid cards that don’t charge the 2.5 per cent fee, and an app called Wise that is best known as a way to transfer money to people in other countries.
The companies behind all of these payment options compete against the big banks and each other. I encourage you to take them for a test drive to, first, save money and, second, to help sustain healthy competition in the financial marketplace.
Wise is a UK-based operation with more than 16 million global customers. Wise offers Canadians what it refers to as a debit card in physical form, or you can load a digital version into Google Wallet and Apple Pay. Use the Wise app or website to transfer money from your regular bank chequing account, and then tap or insert your Wise card to pay for purchases. Outside the country, Wise will convert the purchase into Canadian dollars at an advantageous rate.
If you prefer, you can convert money in your Wise account to multiple foreign currencies any time you like. These funds are then available for purchases in these same currencies.
The appeal of Wise is that it offers foreign currency conversions at what’s known as the mid-market rate. Think of it like a wholesale rate that undercuts what you’d get as a retail bank client. Wise adds a fee averaging 0.65 per cent to your conversion, which is cheaper than the 2.5 per cent charged by most credit cards.
A card with no foreign transaction fees sounds cheaper, but Wise potentially offsets this with its competitive cost of converting currency.
I signed up for a Wise card recently. It took maybe 10 minutes to apply for an account, get it verified and then transfer in money from my usual chequing account. I used the card multiple times via Google Wallet on a recent trip to the United States and found it provided a highly competitive forex rate. The card was rejected twice out of 13 times I tried it, so have a backup.
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Rob’s personal finance reading list
How to fight the cost of car ownership
As noted in a recent column, the average payment on a new vehicle is in the $1,000 per month range. Could you get by if you used a car-sharing service, where you pay a monthly subscription fee for access to a vehicle when needed? Here’s a review of seven car subscription services.
20 best shopping apps
An evaluation of shopping apps from bricks and mortar retailers like Canadian Tire, IKEA and Wal-Mart, plus virtual players like Amazon, Newegg, Temu and Wayfair. Worth reading to find out about available discounts.
Montreal vs. Toronto
A look at which is the better city to live in, with special emphasis on the cost of living.
Dating and debt
A money advice columnist is asked for help by someone who is dating someone and worries this person may be a free spender who is hiding debt. Included is a link to a list of 50 ice-breakers for couples discussing money.
Guest Q&A
Q: Something you might want to research is the price of pork compared with beef. Despite inflation, pork prices have not increased all that much over the past few years. When there is a special on, I can still buy half loins at $1.99 per pound. Beef is another matter. Prices have in some instances doubled over the past few years. I have to assume the pork producers are still making a living from raising pigs. Are the beef producers shafting us with the cost of their products?
A: Here’s an explanation from Sylvain Charlebois, professor and researcher with Dalhousie University: Beef prices have risen because of droughts, while pork prices have fallen in price as a result of high inventories.
Tools, Explainers, Guides and Charts
A step-by-step guide to selling your car online. It’s easier to trade your old car in when buying a new one, but you get less money that way.
The Money-Free Zone
Ten covers of the Beatles song Hey Jude – Wilson Picket, Toots and the Maytals, Count Basie and more.
On social media
A good rundown on the three types of registered education savings plans, with a warning about the third type. That’s the group RESP.
In case you missed these Globe and Mail personal finance-related stories
– The road to gender-affirming care is complex and expensive: ‘Even if something is big-C covered, it’s not little-C covered’
– Avoid leaving your heirs a nasty tax surprise on your RRIF assets when you die
– Can a simple ETF portfolio match the returns of a pension fund? You may be surprised
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You're not bad at money – you're suffering from money shame • Retirement might look different for Gen Z and millennials. Here's how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn’t special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada’s big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here’s how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
Rob Carrick