Pointers for Your Points Cards

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Online shopping and ‘points cards’ have made Visa and Mastercard very popular choices when deciding how to pay for your purchases. Who can argue with a “free” trip to Mexico, courtesy of Visa?

The finances behind how much consumers actually pay to collect this “free” trip is staggering — but there are ways to minimize your costs.

Credit Card Fees for Foreign Currencies

Assuming that you are a consumer who pays the full balance of your card monthly, the most costly decision that a consumer can make is choosing to swipe for transactions that are in other currencies.  

While every card offers different rates and fees, it is not uncommon for Visa and Mastercard to factor in 2-5% into the exchange rate when converting the foreign amount to Canadian, and then to levy an additional fee or commission for the convenience of doing this exchange for you. If you were charging $1000 USD to your Visa card per month, this could easily result in $600 – $1000 spent per year in inflated fees and charges.  The “free” trip doesn’t appear to be free after all!

Getting a USD Points Card

There is a way to protect yourself from this overspending. Both Visa and MasterCard offer USD points cards. Using a USD points card means that when a purchase is made in USD, the balance stays in USD and the client can pay the balance in USD. This puts you in control of when to buy your USD.  

There are two ways that you can benefit from this control:  you can choose to buy the USD when the market dips (ask about our rate watch services) and you can choose to pay your Visa or MasterCard bill with a USD cheque or wire transfer rather than cash, guaranteeing the best rate possible on your exchange.  

Decisions like this one come down to dollars and cents. In order to justify the effort of getting a new card AND the likely annual fee for the card, you have to be spending enough USD during the year to justify the initial spend of both time and money on the card. In the example provided above, where there is an annual savings of $600 – $1000 on a monthly spend of $1000, using a USD Visa card would make good sense.  If your monthly spend was only $100 USD, then your annual savings would only be $60 – $100 and this might not justify the annual fee for a USD points card.

In the end, you can have your cake and eat it too! Points cards can be an excellent way to achieve “free” travel – just make sure that free doesn’t result in fee. Contact the team at Currency Converters to learn more.

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