A foreign transaction fee is a charge added when you make a purchase in a currency other than Canadian dollars. In Canada, it's typically around 2.5%, though it generally falls between 1% and 3%. The fee is usually applied by the card issuer or bank that provides your card.
The charge shows up as a small percentage on top of the purchase amount. It applies whether you're standing in a shop overseas or buying online from home, as long as the transaction settles in a foreign currency.
How a foreign transaction fee works
The fee is triggered by currency conversion. When you pay in another currency, the amount has to be converted back into Canadian dollars, and that conversion is where the charge is added to your statement.
The conversion happens in two steps, but the fee comes from one source. First, the payment network that processes the transaction converts the amount into Canadian dollars at its own rate, which is generally close to the mid-market rate and doesn't include a surcharge. Then your card issuer or bank adds its foreign transaction fee, typically around 2.5%, on top of that converted amount.
On your statement, the fee may appear as a separate line item, or it may be folded into the converted purchase amount. Either way, the total you pay is higher than the listed price.
Here's a short example. Say you buy something for US$100 with a card that charges a 2.5% foreign transaction fee. First the payment network converts it to Canadian dollars at its exchange rate. Then your card issuer adds its roughly 2.5% foreign transaction fee on top of that converted amount. So if the conversion came to CA$135, the fee would add about CA$3.38, for a total of roughly CA$138.38.
When you get charged a foreign transaction fee
The fee often appears in situations people don't expect. It isn't limited to trips abroad.
Travelling overseas and paying with a card in the local currency.
Shopping online from retailers based outside Canada.
Paying for subscriptions or apps billed in another currency.
Buying from a merchant whose payment is routed through a foreign bank, even when the price looks like it's in Canadian dollars.
That last case surprises many people. A website may display prices in Canadian dollars, but if the seller processes the payment through a foreign bank, the fee can still apply.
Foreign transaction fee vs. currency conversion fee
These two terms are often used interchangeably, but they aren't identical. A currency conversion fee refers specifically to the cost of converting one currency into another. A foreign transaction fee is the broader charge your card issuer applies to a foreign purchase, and it usually includes the conversion cost plus the issuer's own markup.
The distinction matters when you're offered dynamic currency conversion (DCC). This is when a merchant or automated teller machine (ATM) abroad offers to charge you in Canadian dollars instead of the local currency. DCC can feel convenient, but the exchange rate is often poor. An added markup can push the total above what you'd pay in the local currency.
How much are foreign transaction fees?
The exact amount varies by card and financial institution. Most Canadian cardholders pay a total foreign transaction fee of around 2.5%, made up of a network component and an issuer component. DCC can add a further markup on top of that.
Fee type | Typical % | Who charges it |
|---|---|---|
| Network conversion | No surcharge (rate only) | The payment network converts at its own rate |
| Issuer foreign transaction fee | About 1% to 3%, often 2.5% | Your card issuer or bank |
| DCC markup | Often 3% to 5% or more | The foreign merchant or terminal provider |
How to avoid foreign transaction fees
There are a few practical ways to reduce or sidestep these charges. None of the following is financial advice; it's general information to help you compare your options.
Use a no foreign transaction fee card. Some cards waive the charge on purchases made in other currencies.
Decline DCC. When a terminal abroad asks whether you'd like to pay in Canadian dollars, choosing the local currency usually costs less.
Pay in a foreign currency directly where possible, using an account or card that holds that currency.
Read your card's terms before you travel or shop internationally, so you know the fee in advance.