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rob carrick

The savvy traveller's options for avoiding a hidden markup on credit-card purchases made outside Canada are about to shrink drastically.

Most credit cards issued in Canada charge a 2.5-per-cent foreign-currency conversion fee when in foreign countries. The tiny group of cards bucking this trend gets smaller on March 15, when Chase Canada shuts down the Amazon.ca Rewards Visa and Marriott Rewards Premier Visa cards.

There are a few ways to go if you travel a lot and put a high value on avoiding foreign-exchange fees. But let's first acknowledge the sneakiness of these charges. The disclosure standard for these fees in bank marketing material shown online is pathetic. There doesn't seem to be any prominent mention of them at all, even as interest rates on balances and cash advances are clearly shown.

Some banks disclose the foreign-exchange fee in the guts of their cardholder agreements, others in their summary of rates and fees. It's a disclosure deficiency that these fees aren't mentioned in a place where people are likely to see them.

Still, some people are clearly aware of these fees and have taken steps to avoid them by using cards such as Amazon.ca Rewards Visa and Marriott Rewards Premier Visa. "These cards are extremely popular with those people who are travelling or ordering stuff from the U.S., just because you're saving that 2.5 per cent," said Patrick Sojka, founder of RewardsCanada.ca.

Mr. Sojka says the two cards left with no foreign-exchange conversion fees will be Home Trust Preferred Visa and HSBC Premier World Elite MasterCard. The former will be of interest to most current Chase customers because of its simplicity – no annual fee, 1-per-cent cash back with no limits on total rewards and, of course, no surcharges on purchases made outside Canada.

HSBC Premier World Elite MasterCard is more of a premium card with a $149 annual fee (no charge for supplementary cards) and a package of benefits that will appeal to frequent travellers. But you have to be an HSBC Premier client, which requires meeting various requirements for income or personal assets, plus the amount of business you do with HSBC.

Another possibility is the Rogers Platinum MasterCard, which offers reward points on foreign purchases that more than offset the conversion fee. "This card is a lot of people's favourite because it does have the foreign transaction fee of 2.5 per cent, but it rewards you with 4-per-cent cash rewards on foreign transactions," Mr. Sojka said. "So you come out 1.5 per cent ahead."

The card offers 1.75 per cent cash back on all Canadian-dollar purchases and the annual fee on the care is $29. At that cost, it's economical for a frequent traveller to keep this card around just for use when out of the country.

Mr. Sojka said there's one final card of interest – the American Express Cobalt card, which offers 5-per-cent rewards on food and drink, 2 per cent on travel and transit and 1 per cent on other purchases. Amex says on its website that the five-times rewards apply to charges made in Canada, but the company confirms purchases outside the country may count as well. If you travel a lot in the United States, Mr. Sojka suggests using this card for meals and drinks because the 5-per-cent reward more than offsets the 2.5-per-cent foreign exchange (forex) fee. Note: This card has a novel fee structure – $10 a month, as with a subscription fee, equivalent to $120 a year.

Using the typical travel-rewards credit card while travelling will earn you points, so there is some level of compensation for the foreign-currency conversion fee. But Mr. Sojka said these rewards may not be enough to completely offset those forex costs. "With airline cards, where you earn frequent flyer miles, you come out ahead if you redeem for higher-end stuff like business class [travel]. If you book economy, you might be coming out even or a little below."

Canadians are sometimes frustrated by the fact there's a wide choice of U.S. credit cards that don't charge foreign-exchange fees and only a microselection in Canada. Mr. Sojka explained this by noting forex fees aren't a big money maker for U.S. card issuers because most global credit-card transactions are conducted in U.S. dollars.

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