Earlier this year, Chase Canada launched the Amazon.ca Rewards Visa card. At first glance, this looked like just another gimmick rewards card where you earn more points for shopping online at Amazon.ca, and not much anywhere else.
However, a unique feature of this card is when you shop outside of Canada you don’t pay foreign conversion fees – in other words, make a purchase with your Amazon.ca Rewards Visa Card in a foreign currency and pay only the exchange rate.
Save On Foreign Conversion Fees
In addition to exchange rates – which are set by MasterCard or VISA – most Canadian credit card issuers charge a 2.5 per cent foreign currency transaction charge on foreign purchases – which adds up to millions of dollars unnecessarily spent by Canadian travellers.
Related: Best Travel Rewards Credit Cards in Canada
Sears Financial is also getting in on the act, and as of July 23, foreign currency transaction charges will no longer be incurred on Sears Financial MasterCard and Sears Financial Voyage MasterCard.
This is a welcome change for Canadians who frequently travel abroad and with the strength of the Canadian dollar, will make overseas travel more affordable – especially for those vacationing on a tight budget.
A recent Statistics Canada survey found that during the first quarter of 2012 travellers spent $8.3 billion outside the country, $5 billion spent in the United States alone. These numbers include “snowbirds” who travel to warmer climates, and suggest Canadians pay millions of dollars a year to use their credit card abroad.
Related: Tips To Maximize Rewards Credit Cards
Sears Financial spokesman, Peter Kalen says many of their customers are snowbirds and they will benefit significantly from this change.
Despite the new movement toward eliminating foreign conversion fees, some of the bigger Canadian card issuers won’t be following suit. According to Capital One spokesman Andrew Clarke, there’s no plan to change their foreign transaction fee policy in Canada at this time.
When you’re travelling overseas spending $5,000 on your credit card in a foreign currency, you’ll save $125 in conversions fees with the Amazon or Sears cards.
Kalen says that while many travellers will continue to incur additional charges on all their foreign purchases, over two million Sears Financial MasterCard cardholders can enjoy the freedom to spend without being charged an additional 2.5 percent on foreign purchases. He also sees this as a positive move for Sears Travel customers.
Related: Avoid These Credit Card Products
Travelling is expensive enough when you consider the cost of flights, hotels and rental cars. If you’re a frequent traveller, take a look at how much your credit card issuer is charging in foreign exchange and conversion fees and find a way to minimize the fees.
Credit card companies spend a lot of money convincing you to sign up for their cards. Once they have your business, most card issuers will continue to bombard you with offers.
I always get phone calls and direct mail offers from my credit card provider – MBNA Canada – trying to get me to sign up for something new. These products are never a good idea. I prefer to use my Smart Cash card, collect cash back, then pay off the balance in full. I don’t want to pay a dime to my credit card company, in interest or for any other fees.
Here are three credit card products you should avoid:
Identity Theft Protection
One sales pitch I hear on a regular basis is for credit alert monitoring that helps protect against identity theft. The service costs $17.99 per month and includes online access to your credit report and credit score from Equifax Canada.
It also proactively monitors, manages and protects your credit and identity information and can detect early signs of fraudulent activity.
Related: Choose Your Rewards Card Carefully
Yet, according to my credit card agreement, I’m already covered. If a fraudulent charge appears on my statement I won’t be held responsible for any unauthorized use of my card, PIN or account number.
Balance Protection Insurance
Another sales pitch that I get from my credit card issuer is about balance protection insurance.
For $0.99 per $100 of the average daily balance you can protect your credit rating in case of unexpected job loss or disability and can ease the burden on your family in the event of my death.
This means you’ll pay nearly $20 per month if you carry a $2,000 balance from month-to-month. Not a good deal.
Access Cheques
My credit card company is always sending me access cheques to arrange a balance transfer or deposit. The marketing material suggests I can use the access cheques for many things, including:
- Visiting friends and family – create some memories that will last a lifetime
- Holiday shopping – the people you care about deserve the best
- Planning a summer getaway – you work hard; treat yourself and your family to a holiday
Related: Do You Put Groceries On Your Credit Card?
A quick glance at the fine print tells me this is a terrible idea for consumers.
The annual interest rate for access cheque balances is 19.99 per cent, and the transaction fee for access cheques is one per cent of each transaction amount, with a minimum fee of $7.50.
When used responsibly, credit cards are a great financial tool that help people budget effectively, manage their cash-flow, and earn rewards. Just make sure you don’t fall into the credit trap. Pay off your balance each month and don’t get sucked in by credit card companies and their aggressive sales pitches.