If you are traveling out of the country for any period of time, you need to have a plan on how you will be getting foreign currency and how you will be spending it. You have a lot of options in this regard, such as credit cards, debit cards or exchanging cash before you travel.
I previously touched on my opinions for the best credit cards to save you cash on a longer trip. Now I will tell you what I have found out about using Automated Teller Machines (ATM) and debit cards. Also check out PART 2 of Avoiding Foreign ATM Fees.
There are many options for banks here in Canada, some of the main ones being Scotiabank, RBC, TD Canada Trust, BMO and CIBC. Each bank has different fees for when you want to take your money out of an ATM. Some banks charge different rates for you to withdraw your money. Usually if you are in your home country, these fees are waived and you are not required to pay to access your money. You may still have to pay a small fee if you are using a machine in a convenience store or a bar, ect.
Remember those foreign exchange fees that I discussed on another blog? Well they cone into play with using your debit card as well.
Now, if you are using an ATM (also known as ABM – Automatic Banking Machine) out of your home country, most banks will charge you some fees, anywhere from $1.50 to $5.00. Now for most people going on a short trip, this is not a lot of money to be spending, but for those of us that are traveling for longer, or don’t like carrying large amounts of cash on you, you might want to take a look below.
TD Canada Trust
With TD bank, you have a couple of options. Their main accounts all have a $5.00 foreign ATM fee AND charge a 2.5% foreign exchange fee. These fees will eat up your extra money pretty fast.
They do have an option to avoid the ATM fees if you use their “select service” account. When you have a select service account they will waive your foreign ATM fees, so you don’t have to worry about that $5.00 per transaction. The only downside is that you have to either pay $29.95 a month to have this account. If you have a balance of over $5000 in that account, then you don’t have to pay the monthly fee.
So basically, if you have extra money that you generally leave in your account, then the TD select service account is a pretty good account to have for travel and avoiding ATM fees. If you don’t have $5000 to keep in your account while you travel, then this account is not for you. I really have trouble seeing the select service plan being worth the $29.95 a month unless you are using ATM machines out of country, many times within a given month. But even then there are likely better options through different banks.
BMO is very similar to TD in that most of their accounts have a $5.00 foreign ATM fee (only $3.00 in the US) and still charge the 2.5% foreign currency conversion.
BMO also has a “premium plan” that gives you 5 free foreign ATM transactions a month, but $5.00 per transaction after that. The monthly cost for this plan is $25.00. Similar to the TD select plan, they require $5000 to be left in the account if you want this fee waived.
CIBC is very simple – all accounts charge a $5.00 foreign ATM fee with 2.5% foreign exchange fee.
RBC has a $5.00 foreign ATM fee (seeing a pattern yet?) with 2.5% on most of their accounts.
They do have a VIP banking account which costs $30.00 a month and there are no ATM fees. They do not have a minimum balance to waive the monthly fee of $30.00.
Okay, so here is an interesting one. Scotiabank still has the $5.00 foreign ATM fee with a 2.5% foreign exchange fee BUT they are also part of the Global ATM Alliance which doesn’t charge the $5.00 fee if you use a machine with one of their partner banks.
WHAT DOES THIS ALL MEAN!!??!?
Well, basically if you are going to travel and keep $5000 in your account, I would go with the TD select service account and not have to worry about foreign ATM fees.
The BMO premium plan is similar, but you only get 5 free transactions and then each one after that will be charged $5.00, so the only reason I could see using this plan is if you already bank with BMO and don’t want the hassle of opening another account with a new bank.
If you won’t be keeping a balance of $5000 in your account during your travels, I would use any Scotiabank account, and withdraw money from any bank within the global ATM alliance so you don’t have to pay any ATM fees.
Here is a short list of some banks that are in the global ATM alliance and what country they are found in. For the full list, check out this page.
USA – Bank of America
United Kingdon – Barclays
France and Belgium – BNP
China – China Construction Bank
Germany – Deutsche Bank
Australia and New Zealand – Westpac Bank
Now have you noticed that I haven’t touched on those pesky 2.5% foreign exchange fees that I so adamantly avoided when I talked about credit cards? Well it appears that there is no good option to avoid paying these fees. I did some research and found that only ING Direct didn’t have the 2.5% foreign exchange fee, but they may charge you the fee in some other way. I managed to find this on their website:
“A Permitted Transaction in a foreign currency will be converted to the currency of your Account at an exchange rate determined by ING DIRECT on the date the transaction is processed. This rate may differ from the rate in effect on the date of the transaction.”
Which indicates that ING Direct gets to determine the exchange rate and possibly build the 2.5% foreign exchange fee into that charge. I did not find any conclusive evidence that their charge is definitively less or more than the other banks, so I would be wary of this.
So, If you are planning to travel out of the country, and aren’t interested in paying fees every time you use an ATM machine, you should look closely into what account you have and consider opening another account, possibly at another institution, to save you money.
CHECK OUT PART 2 of Avoiding Foreign ATM Fees where I made a chart summarizing everything and touched on 2 more banks!