Is It Worth Getting a U.S. Dollar Credit Card?

Young couple looking at credit card statement on laptop

According to the most recent census, two out of three (66%) Canadians live within 100 kilometres of the U.S. border. So, naturally millions of citizens cross over to the 13 neighbouring states every month. Many snowbirds even choose to stay for part of the year. But, with the value of the loonie significantly lower than the greenback, Canadians see less bang for their buck.

To add further salt to their wounds, credit card companies typically charge a fee anywhere from 2.5% to 3% on foreign transactions. That means, even after exchange rates, cardholders will pay another $25 to $30 in fees for every C$1,000 in purchases. This predicament may lead some to wonder whether it’s worth getting a U.S. dollar credit card.

How Do U.S. Dollar Credit Cards Work?

U.S. dollar credit cards are available in Canada and allow consumers to shop without exchange rate surprises and even pay U.S. bills. Unlike a standard credit card, all purchases are in U.S. currency rather than Canadian dollars, meaning no conversion takes place. Cardholders can avoid currency exchange fees to their account as well as foreign transaction fees.

Using a U.S. dollar credit card can make purchases simple but paying the statement can be complicated. Unless the cardholder has a U.S. bank account, they would still need to have money converted through a foreign currency exchange or a bank to pay their credit card statement. Frequently converting currency can be costly and inconvenient.

Who Can Benefit from a U.S. Credit Card?

Consumers who may find a U.S. dollar credit card useful are:

  • Long-term travellers: People who may spend long durations in the States including those who have a timeshare or vacation home there and snowbirds.
  • Frequent visitors: Residents of border communities and business travellers who do a large amount of cross-border shopping.
  • U.S. bank account holders: Cardholders who can pay their statements directly from their account without requiring a U.S. dollar bank draft, or other product that typically carries additional costs. Travellers can convert large sums of money at one time and avoid multiple exchange costs.
  • U.S. income recipients: For those who have a source of U.S. income, possibly from American clients, can avoid currency exchange altogether.

Crunching the Numbers

According to the Trade Commissioner Service of Canada, the average Canadian pays around US$88 per day in Florida. For our example, let’s use a Canadian snowbird who stays half of the year in the Sunshine State. That means our traveller spends roughly US$16,000 during their stay, which amounts to C$21,872.86!

U.S. dollar amount and exchange rate Canadian dollars
US$16,000 x 1.37 C$21,872.86

*The U.S. dollar equalled 1.37 Canadian dollars on March 9, 2020.

On top of that, if our traveller uses a Canadian credit card with foreign transaction fees, they would also see an extra 2.5% to 3% in charges.

Canadian dollars spent and foreign transaction fee rate Total Canadian dollars charged to credit card
C$21,872.86 x 3% C$22,529.05

That means our single traveller pays an additional C$656.19 per year in fees. If our snowbird were to open a U.S. dollar credit card and U.S. dollar bank account, they could avoid these extra charges.

Alternative Options

A U.S. dollar credit card is not the only way to avoid paying foreign transaction fees, also known as FX mark-up. Many travel rewards credit cards offer this perk. These cards typically come with an annual fee, but if the yearly cost outweighs the amount you pay in foreign transaction charges, you will save money in the long run.

Here are three alternative options for a U.S. dollar credit card: one with a fee, one without, and a prepaid option.

Annual Fee

For $139 a year, the Scotiabank PassportTM Visa Infinite* Card offers cardholders six complimentary airport lounge visits annually, no foreign transaction fees, and a full suite of travel insurance. Plus, most people earn over 1% in Scotia Rewards points.

No Annual Fee

The Home Trust Preferred Visa Card gives cardholders 1% cash back on eligible purchases, with no limits to how much they can earn. Plus, access a complimentary Roadside Assist membership and no foreign transaction fees, without paying an annual fee.

Prepaid Credit Card

Preload the KOHO Visa* Prepaid Premium Card as part of your travel preparations. Earn 2% cash back on eating, drinking, and transportation. Get 0.50% back everywhere else you shop. For a fee of $84 a year, KOHO cardmembers get the premium package. So, you can spend like you are using a debit card, shop anywhere credit is accepted, and earn cash back, all without foreign transaction fees.

These cards can save you money when you shop online at foreign merchants and abroad. Although you will pay the foreign currency rate—that’s unavoidable—you will dodge the foreign transaction charges.

U.S. Dollar Credit Card vs. No Foreign Transaction Fees

The choice between a U.S. dollar credit card and one with a no foreign transaction fee perk is circumstantial. If you spend a lot of time and money in the States and hold a U.S. dollar bank account, you may benefit from a U.S. dollar credit card.

For all other foreign transactions in the States, overseas and online, a credit card with no FX mark-up should do just fine. When combined with the other great membership perks, you’ll be set for stress-free travel and billing simplicity. Compare credit cards with no foreign transaction fees at RateSupermarket.ca to find the best match.

Related Topics

Credit Cards

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>