To calculate the fees hidden in the exchange rate, one can try to compare a specific quoted rate to the mid-market (neutral) rate available on a number of websites, but the mid-market rate changes all the time.
The easiest method is to get two rates from the same provider at the same time: both the currency X to currency Y rate, and the Y to X rate. For example, on December 1st, 2015, the CAD to EUR rate offered by a big-5 Canadian bank on non-cash transactions smaller than $1000 was 1.4719, whereas the EUR to CAD rate was 1.3670. Sometimes the second rate looks very different from the first (e.g., the second rate would be expressed as 0.7315), in which case divide the number one by the second rate to get 1.3670. The halfway point is (1.4719+1.3670)/2 = 1.4195. Therefore the bank was charging (1.4719-1.4195)/1.4195 = 3.7% to convert CAD to EUR, or EUR to CAD. Presumably on larger transactions the rates offered would be somewhat better, but the hidden forex fees would still be several percent.
On short trips, many people use a combination of ATM withdrawals and credit/debit card payments. Some foreign cash may also be obtained before departure at one’s bank or at a currency exchange office. These methods are convenient but have high costs in percentage terms.
Using Canadian debit cards at foreign ATMs is a surprisingly costly way to obtain cash when all the fees are added up. First, there are fixed fees commonly charged both by the bank issuing the debit card (e.g., at BMO, CIBC, RBC or TD: $3 in the US ±Mexico and $5 elsewhere) and by the owner of the overseas ATM (perhaps $3). Then Canadian banks charge 2.5% on the forex.
For example, the fine print at RBC says:
Visa International takes about 0.3% on USD-CAD exchange or 0.4% for EUR-CAD so the total forex charge is 2.8-2.9%. Therefore, when withdrawing the equivalent of 100 CAD in Europe, the total fee is about $5 + $3 + $103*2.9% = $10.98. Yes, that’s an 11% fee. Upon withdrawing the equivalent of 500 CAD, the fee would be $5 + $3 + $503*2.9% = $22.59 or 4.5%.
Scotia Bank is part of the Global ATM Alliance, which means no fixed fees when using ATMs from participating institutions, but the fine print (see their note 1) seems to imply that you still incur the 2.5% conversion fee.
When making credit card purchases overseas, Canadian banks typically add a 2.5% surcharge on the rate provided to them by Visa International or MasterCard Worldwide (e.g., . Visa International itself charges on average about 0.3% for the CAD-USD pair (note 1) or 0.4% for the CAD-EUR pair (note 2). On a $1000 Visa purchase in the US, the total fee is therefore $28 (2.8%), or $29 in the Eurozone (2.9%).
Therefore, using credit cards is generally cheaper than using ATMs, although in some countries credit cards are not widely accepted. Merchants in places like Australia and Europe can also charge more on credit card purchases than when using other forms of payment
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