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How Much Do Banks Charge for Currency Exchange?

3 min read

how much do banks charge for currency exchange

Written By

Nick Saraev
Nick Saraev

Stepping into the realm of currency exchange can feel like entering a new world, especially when you're looking to stretch your Canadian dollars (CAD) across borders or dip into the vibrant foreign currency markets.

It's a journey filled with twists and turns, where understanding exchange rates and currency conversion fees becomes more than just a savvy financial move. It transforms into a crucial strategy for anyone aiming to make the most out of their money in a global setting.

Imagine this: You're about to embark on an adventure overseas, or maybe you're planning to sprinkle some financial support to loved ones far away. In either case, getting a grip on the dance of foreign currencies and exchange rates is critical.

This introduction is your first step into a world where confidently navigating currency exchange can become your financial superpower, ensuring every dollar goes as far as possible.

Let's unravel the complexities of currency conversion together, turning potential pitfalls into opportunities for growth and understanding.

The Basics of Foreign Currency Exchange

Currency exchange is the process of swapping one country's currency for another, enabling global trade, travel, and investment.

At its core, exchange rates determine how much foreign currency you get for your Canadian dollars. These rates fluctuate based on economic conditions, market demand, and geopolitical factors, making exchanging currency an essential financial consideration.

For example, if you're exchanging Canadian dollars for Chinese yuan (CNY), and the exchange rate is 1 CAD to 5.30 CNY, exchanging 100 CAD would give you 530 CNY.

This simple calculation highlights that currency exchange is not a one-to-one transaction. It's influenced by the current exchange rate, which can significantly affect how much foreign currency you receive.

Financial institutions play a pivotal role in facilitating currency exchanges. They offer access to foreign currencies but also impose fees that can impact the final amount you receive.

Two common types of fees include currency conversion fees and foreign transaction fees.

Currency conversion fees are charged for converting from one currency to another, while foreign transaction fees may apply when making purchases or withdrawals in a foreign currency.

Places Where You Can Exchange Currency

There are several places you can exchange money, though some have limitations on amount or type.


Often considered the most secure option, though they may not offer the best exchange rates. Banks may not have more obscure currencies.

So, while it’s easy to exchange your Canadian dollars for U.S. dollars (USD), you might run into trouble if you need something not as widely used, like Kazakhstani tenge (KZT) or even Australian dollars (AUD).

Specialized Currency Exchanges

These might provide more competitive rates compared to banks and tend to have a bigger range of widely used currencies to exchange. They can also arrange to have currencies that aren’t widely exchanged brought in on request.

Airport Kiosks

Convenient for last-minute exchanges, but usually come with higher fees, and will generally only have major currencies such as the U.S. dollar and the local currency on hand.

Online Wallets and Exchanges

Online exchanges offer the convenience of exchanging currencies from anywhere, often at competitive rates. These are used to conduct p2p (person-to-person) currency exchange and can facilitate cryptocurrency exchange.

Exercise care when using an online exchange, as this is where many scams and illegal transactions can take place.

Remember, when planning to carry cash when travelling abroad, it's not just about how much but also where you'll exchange it. With a bit of insight and planning, navigating the currency exchange waters can be a breeze, helping you keep more money in your pocket while exploring the vast financial ocean.

Understanding Different Fees

When engaging in transactions involving foreign currencies, understanding the various fees that can apply is crucial for effective financial management.

These fees, including foreign transaction fees, currency conversion fees, and foreign exchange fees, directly impact the total amount of currency you receive or the cost of your international transactions.

Foreign Transaction Fee

Foreign transaction fees are commonly charged by banks and credit card payment processors when you make a purchase or withdraw money in a currency other than Canadian dollars.

For example, making a 200 Canadian dollar purchase in Argentina might incur a 3% foreign transaction fee from your bank, adding an additional 6 CAD to your transaction cost.

It's a fee that's easy to overlook but can add up quickly, especially for frequent travellers or those making numerous foreign transactions.

Learning about foreign transaction fees for credit cards can provide insights into how these fees are applied and tips for minimizing their impact.

Currency Conversion Fees

Currency conversion fees are a crucial aspect to consider when exchanging money from one currency to another. These fees can significantly vary across different financial institutions, directly impacting the amount you receive after conversion.

Let's take a practical example to understand this better. Suppose you want to exchange 200 Canadian dollars for Indian rupees (INR).

If the financial institution you choose applies a 2% currency conversion fee to the transaction, this fee will affect the total amount of rupees you end up with.

Foreign Exchange Fee

Foreign exchange fees, though similar to currency conversion fees, are specifically tied to the exchange of currencies on the foreign exchange market. These fees may be hidden within the exchange rate you're offered, making it less favourable compared to the actual market rate.

If you're exchanging 200 CAD and the bank's exchange rate includes a 1.5% foreign exchange fee, the amount of international currency you end up with could be less than you'd expect based on the market rate alone.

Banks and credit card companies may not always make these fees clear upfront, so reviewing your account terms or directly inquiring with your financial institution is advisable.

The details of these charges are often buried in the fine print of your agreement, highlighting the importance of staying informed and asking the right questions to manage your financial transactions effectively.

How to Exchange Currency Wisely

Exchanging currency wisely is all about strategy, ensuring you get the most bang for your buck while navigating international financial waters.

A savvy approach can save you from unnecessary expenses and enhance your overall experience, whether travelling abroad or engaging in cross-border transactions.

Firstly, it pays to shop around. Currency exchange rates can vary significantly between providers, so comparing rates is essential to securing the best deal.

This doesn't mean you should automatically opt for the cheapest option. The reliability and reputation of the financial institution are just as important. Avoid exchanging money at airports or tourist-heavy areas where fees are notoriously high and rates are less favourable.

Opting for a credit or debit card that offers zero foreign transaction fees can be a game-changer.

Such cards eliminate the extra charges associated with purchases made in a foreign currency, making them ideal for travellers or anyone conducting transactions in foreign currencies regularly.

When choosing where to exchange currency, reputable financial institutions often provide the most reliable and competitive rates.

For those looking to make or receive international payments, exploring services like international transfers with KOHO can offer a seamless and cost-effective solution. Be aware that some banks charge electronic transfer fees, which can add up over time, underscoring the importance of selecting the right platform for your financial needs.

Choosing the Right Payment Methods Abroad

Using credit or debit cards abroad is a convenient option, offering a level of security and ease not found with carrying large amounts of foreign cash.

One significant advantage is the ability to track spending easily and benefit from the protection against theft or loss.

However, it's crucial to be aware of foreign transaction fees that can quickly add up. Opting for cards with zero foreign transaction fees can help you avoid these extra costs, making every transaction more cost-effective.

Foreign Cash: When Tangible Currency is Still King

There's still a place for foreign cash in the modern traveller's wallet, especially in destinations where digital payments might not be as widely accepted. Having local currency on hand is indispensable for small purchases, tips, and emergencies.

The downside is that it requires upfront effort to exchange money before your trip or find a reputable exchange service abroad, often at less favourable rates.

Saving on Foreign Transaction Fees: KOHO's Solutions

In a world where managing finances across borders can often lead to unexpected fees, KOHO stands as a financial ally, offering products specifically designed to sidestep these costs.

Virtual Credit Cards: Spend Globally, Save Locally

KOHO’s virtual credit card is an ideal solution for those looking to make international transactions without the added weight of foreign transaction fees.

This digital marvel not only streamlines purchasing across borders but also plays a crucial role in helping users build their credit with KOHO, marrying convenience with financial growth.

For anyone aiming to dive into the global market or simply secure their online shopping, KOHO’s virtual card is an essential financial tool.

Maximizing Savings While You Travel

Beyond the digital convenience of virtual cards, KOHO's high-interest savings accounts offer a robust platform for your savings to flourish.

These accounts, renowned for their competitive interest rates, ensure that your money is not just saved but also grows.

Integrated with KOHO’s plans for spending and saving, these accounts adapt to your financial landscape, whether you’re meticulously managing a travel budget or aiming to amplify your savings.

KOHO extends its visionary approach to financial management into the realm of business, providing features like overdraft protection coverage and the ability to monitor your free credit score, ensuring comprehensive financial wellness for personal and business users alike.

Through KOHO, the journey through the complexities of currency exchange and financial management becomes a seamless aspect of your adventures, allowing you to focus on what truly matters: The experiences themselves.


Getting a handle on those pesky currency exchange fees isn't just about balancing the books. It's all about making sure your hard-earned cash stretches as wide as your travel dreams without getting nibbled away by sneaky charges or less-than-stellar exchange rates.

Think of it like this: Every time you dodge these financial pitfalls, you're giving yourself a high-five for smarter spending.

As we've seen, becoming clued in on things like foreign transaction fees and conversion costs and picking out wallet-friendly tools for handling money abroad is basically fine-tuning your money machine for peak performance.

Whether you find joy in hopping onto international flights or prefer snuggling at home while shopping from overseas stores online, investing just a smidge of effort into choosing how to manage that money goes a long way.

So nudge yourself towards options like KOHO that tick both boxes: they fit snugly with how you aim to tread around the globe while looking after those budget goals too. By doing so, each dollar packs more punch no matter where life’s journey flings you!

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!

Nick Saraev

Nick is a freelance writer and entrepreneur with a particular interest in business finance. He's been featured in publications like Popular Mechanics and Apple News



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