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Understanding foreign currency conversion fees

It is extremely important to understand foreign currency conversion fees – which is how much your debit and credit cards will charge you when you use them outside of Canada. Even though I travel to the USA often, I never really took the time to research into just how much using my credit card was costing me. So save yourself some money by spending a few minutes calling the number on the back of each credit card. Have them explain the fees and currency conversion amounts to you.

A foreign currency conversion fee is charged to consumers to help offset the cost incurred by credit card companies and the bank, since international transactions are more expensive to process than domestic transactions.

For example, with my MBNA Platinum Plus MasterCard (still the greatest credit card in the world, BTW), all transactions made in a foreign currency will be converted to Canadian dollars. Then, an amount equal to 2.5% of the converted transaction amount will be added to the total.

Meanwhile, my President’s Choice Financial (PCF) MasterCard first converts all foreign transactions into U.S. dollars, and then into Canadian dollars, before charging a 2.5% foreign currency conversion fee.

Aside from credit cards, my options are using my ING Direct or PC Financial debit cards. You will not be able to make individual transactions at stores with either debit card, but you can use them both to access your money through bank machines.

PC Financial charges $3 per withdrawal from bank machines located outside of Canada. In addition, they also charge a fixed rate of 2.5% of the converted amount as their foreign currency conversion fee.

ING Direct, on the other hand, charges $2 for each withdrawal from foreign bank machines, but does not charge a foreign currency conversion fee.

The picture in this blog post shows the only things I carry in my wallet: ING Direct debit card, MBNA MasterCard, Bahn25 discount train card, and driver’s license. I also carry my passport at all times, as well as my NEXUS card – not that it helps me at all over here. My PCF MasterCard, PCF debit card, and any other cards I have are kept locked away in the apartment.

Aside from understanding the foreign currency conversion fees associated with both your debit and credit cards when traveling abroad, here are some tips to help keep you safe and save you money:

Inform your credit card company of your travel plans. Nothing would be more frustrating than having your credit card declined and suspended for suspicious use, because you didn’t take the time to let the card issuer know of your overseas travel plans.

Avoid Dynamic Currency Conversion. Foreign merchants will sometimes try to take advantage of tourists by offering to quote the final price of your purchase in U.S. dollars, instead of in the local currency. The exchange rate is selected by the merchant, and is usually much higher than your credit card. Make sure you know the currency conversion rates before you buy anything. Or, you can download a smartphone app that will do the conversion for you.

Double-check your card expiration date. Your trip could take a serious nosedive if you suddenly discover that your credit card is set to expire while you’re traveling. Contact customer service to see if they can issue you a card with a new expiration date, or mail you a new card to your address abroad, closer to when the card will actually expire.

Stick to using one credit card (but bring a back-up). Using a single credit card will make it easier for you to track your spending while you are away. But, you should also bring a back-up credit card just in case of an emergency – such as, your credit card being suspended, or losing your wallet. The back-up card should be stored somewhere else besides your purse or wallet – like in a safe in your hotel room, or in a money belt if you need to have it with you.

What tips do you have for using your credit and debit cards abroad?

Simplifying my savings strategy

For the last 5 years, I’ve talked about how multiple savings accounts have worked for me. It helped me keep track of my money and stay organized.

But, I don’t think it’s working for me anymore.

When I was eliminating my credit card and student loan debt years ago, it made sense to keep my goals separate because I was organizing my finances so that I was maximizing my debt repayment. Then, when I got out of debt, I shifted my efforts over to creating and managing a system of automatic withdrawals into multiple savings accounts. This worked because I had defined targets and I could see exactly how much money I could spend on certain things – like travel or gifts.

However, over the past year, this system has turned into a nightmare. I have so much fluctuating freelance income that the automatic savings withdrawals I had originally set up just isn’t working anymore. I find that I’m making multiple manual transactions into my savings accounts every couple of days.

Plus, if I’m being totally honest, I have a handle on how to save money now. I no longer need to monitor my finances like a hawk because I’ve broken that paycheque-to-paycheque cycle. It’s taken nearly five years of hard work, but saving comes naturally to me now. Sure, I still input my data into Quicken every week, and I still calculate and tally up every single purchase. But at this point in my life, I think I could use some simplifying.

So my eight savings accounts have disappeared. In its place stands just two: my savings account, and my emergency fund.

Do you have just one savings account, or do you spread your money across multiple accounts?

Resolving my RRSP problem with TD Canada Trust

My issue with TD Bank has been resolved. But I feel like the only reason it was resolved (and resolved quickly) was because of yesterday’s blog post, and my irritated Twitter messages.

When I spoke to the last Mutual Fund rep on the phone on Monday, he suggested switching my e-series funds over to a Canadian Money Market fund. That way, they will be out of the tricky e-series funds as quickly as possible, and then I could go into a branch and someone would be able to cash them out for me using the Home Buyer’s Plan. The money would be in my account within 2 business days. Exactly the solution I was looking for: simple, quick, and straightforward. Why that took 4 days of frustration is beyond me.

Yesterday, as soon as I got into the office, another Mutual Fund rep called me. Actually, he might have been the Manager. He was nice enough, and said that he understood how frustrated I must be, blah blah blah. He said that I could fax him a letter stating that I wanted to withdraw my RRSPs, and they could authorize the transaction from the call centre – eliminating the need for me to make an appointment to go into a branch. Why, thank you!

So there you have it. I have the funds in my bank account now. And, since the stress of figuring out my financials is almost over, I feel like a huge weight has been lifted off my shoulders.

Still. I can’t help but be angry that the solution to my problem was so simple, yet it seems like nobody offered to do anything for me until I escalated my issues to the internet. What’s up with that?

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