Cross-border debit fees

Background

Canadians can use their debit cards to make purchases at foreign points of sale (e.g., while travelling or online with merchants located abroad) or to withdraw cash at ATMs outside Canada. For these transactions, banks typically charge a cross-border debit fee for the purchases and withdrawals. Cross-border debit fees also apply to refunded or credited amounts, increasing the total cost of transactions that involve returns.

For cross-border debit transactions, banks do not handle the currency conversion themselves. Instead, the currency conversion is handled by the operator of the payment network used for the transaction (e.g., Visa, Mastercard, Interac).

Fee structure

Most banks charge cross-border debit fees that range from 2.5% to 3.5%, with 2.5% being the most common. The fee is calculated on the Canadian dollar amount after the foreign currency has been converted at the exchange rate set by the payment network used.

Digital banks have adopted more varied pricing approaches, with some charging 2.5% and others charging no cross-border debit fees.

Alternative financial service providers, such as fintechs, show the greatest diversity in pricing. Some do not charge cross-border debit fees at all, while others use tiered or plan-based pricing models. Under these models, lower-cost plans typically include foreign transaction fees of up to approximately 1.5%, while higher-tier or premium plans may waive these fees entirely.

Disclosure

Banks are required to disclose all applicable fees in account agreements. Information related to cross-border debit fees is disclosed as part of the broader account agreement and fee schedule. These disclosure requirements are intended to ensure that consumers are informed of potential charges and do not incur fees that were not disclosed.

Key findings and implications

Key finding 14: Disclosure requirements related to cross-border debit fees do not support price transparency, limiting consumers’ ability to assess costs and choose the most appropriate form of payment

The timing and content of disclosure result in a relatively low level of transparency for cross-border debit fees.

Cross-border debit fees are not presented at the point of sale or at ATMs when the transaction is initiated. Moreover, these fees are embedded in all-in transaction costs, with no separate disclosure of the foreign exchange rate applied to the transaction. As a result, consumers may have difficulty understanding the full cost of a transaction—including the various components of the total fees and which party applies each charge.

This lack of upfront clarity can lead consumers to incur higher-than-expected costs and limits their ability to compare options and select lower-cost alternatives.

Key finding 15: The choice of provider can materially influence the total costs of cross-border debit fees

Cross-border debit fees can accumulate quickly relative to lower-cost alternatives. For example, a Canadian traveller who banks at a Big Six bank and spends $2,000 USD over a 2-week trip would incur almost $100 in cross-border debit fees at a 3.5% rate. By comparison, a lower cost provider such as a fintech or a digital-only bank (e.g., EQ Bank) may reduce that cost to close to $0 for the same spending.