Cash or credit card? Here’s how to get the best exchange rate while travelling

Travelling soon? Here's what you need to know about how much cash you should bring, when and where to exchange currency and the best credit cards for frequent travellers.

Amid the flurry of pre-vacation packing and prep, it’s easy to forget considerations about the best way to pay for things abroad. But at a time of high inflation, questions about what cards to use, how much local cash to withdraw and which currency conversion services to avoid are particularly valuable.

Here’s what to know when seeking cost-effective methods of spending money overseas.

The best-case scenario is using a credit card, said Hayley Berg, lead economist at Montreal-based travel data firm Hopper.

They’re not accepted at every roadside stand or backwoods bar, but they’re widely used in most countries, particularly in cities and other popular tourism destinations.

Each credit card purchase includes a foreign transaction fee, usually around 2.5 per cent. Eventually that can weigh on the pocketbook, but it’s lower than most ATM and debit card fees, Berg said. If a bistro bill of 76 euros converts to $100 — which it did as of Thursday — the customer would be charged $102.50.

Multiple credit card providers offer fee-free overseas transactions. These come via “travel cards,” including the Scotiabank Passport Visa Infinite Card, HSBC World Elite Mastercard and Brim Mastercard.

“Usually people just go with what they have. Only if you’re travelling a lot is that going to start to add up,” said Richard Vanderlubbe, CEO of travel agency Tripcentral.ca, who recommends travel cards only to business travellers and habitual tourists.

Credit cards also have a currency conversion rate — for converting the purchase abroad back to your home currency — that is marginally higher than the official “interbank” rate. But credit card companies typically offer the best consumer rates compared with ATMs or cash exchanges, he said.