What is the best way to exchange money? That’s easily the question I get asked the most these days. Maybe it’s because finding deals on flights and hotels are a little easier these days but it’s more likely that people are just more aware of how exchange rates affect us.

A couple of years ago, the Canadians dollar was on par with the U.S. dollar but now we’re at historic lows. When Brexit happened, the English Pound dropped in value which made it a buying opportunity for those who were heading over to the U.K. The point is, currency exchange rates change all the time and there’s not much we can do about it. Instead of worrying about the exchange rates, we should focus on minimizing the fees we pay.

best way to exchange money

Avoid fees completely with credit cards

Although it’s not technically cash, using a credit card with no foreign exchange fees is the cheapest way to pay for things. Not every card waives the foreign transaction fee so if you don’t have one of the following cards, you’ll be charged an extra 2.5% whenever you make a purchase in a foreign currency.

Scotiabank Passport Visa Infinite – Of all the Canadian credit cards with no foreign transaction fees, the Scotiabank Passport Visa Infinite. There is an annual fee of $139, but you get a Priority Pass Membership and six free passes a year. The signup bonus of 25,000 Scotia Rewards points is worth $250, so there’s a lot of value here. I wrote a detailed review of the Scotiabank Passport Visa Infinite card if you want to learn more.

Rogers World Elite Mastercard – Although you technically pay the 2.5% exchange fee, the 4% cash back on foreign transactions essentially gives you a 1.5% gain. This card mainly benefits Rogers customers, however, you can call in once a year and claim a statement credit. Read my review of Rogers World Elite Mastercard for my full thoughts on the card.

Home Trust Preferred Visa – This no fee card is pretty vanilla since it only gives you 1% cash-back, but for some people, that’s all they’re looking for. I use this card since I don’t like paying annual fees for credit cards and it has served me well so far. I’ve written a Home Trust Preferred Visa review, so check it out now if you’re interested.

Check out my post about Canadian credit cards without foreign transaction fees for an in-depth analysis of each card. If you’re looking for ways to earn points for free travel, then you’ll want to read my guide to the best travel credit cards in Canada.

One other thing about using credit cards when travelling. When given the choice, always choose to be charged in the local currency as opposed to your home currency. The reason for this is that merchants set their own rates which can be much higher than the rate Visa and MasterCard use when you pay in the local currency.

best way to exchange money cash

Exchange options when you need cash

STACK – STACK is a prepaid Mastercard that charges no foreign transaction fees. This is huge for Canadians since we finally have an option to withdraw money from ATMs without having to pay any additional fees outside of any fee that the ATM we’re using. What we pay is Mastercard’s mid-market rate at the time of the withdrawal so it really is the cheapest way to get cash in a foreign country. If you sign up using my referral link, you’ll get $5 when you activate your card. Note that you must click the link via your mobile device for it to work.

ATMs – Local ATMs will almost always be the cheapest way to exchange money. Generally speaking, ATMs charge the spot rate plus about 2.5%. This extra charge is known as a foreign transaction fee and can’t be avoided. Your home bank and the specific machine you’re using may also charge you a one-time fee of up to $5 so that’s something to consider with your overall costs. The best way to exchange money while minimizing costs is to simply withdraw your daily limit or use an ATM that’s partners with your bank.

Foreign exchange offices – This gets a bit tricky since every exchange office has different rates. Foreign exchange offices found in airports and malls usually don’t have good rates. Any “no-fee” exchange office also tends to have higher rates since they need to make a commission. Despite all of this, some exchange bureaus offer competitive rates. The key is to know what the exchange rates are so you can do the math to see if the rates are fair. If the premium is around 2.5% then you’re getting a decent rate.

Banks – This may come as a surprise but exchanging money at any of the big banks in Canada is usually not a good idea. Unless you’re getting USD, banks charge a pretty premium when exchanging money. Their overall rates really aren’t that good and often you’ll need to order the currency in advance.

Online – If by chance you need to exchange a large sum of money ($2,000+), Knightsbridge Foreign Exchange is the cheapest option for Canadians. Zenbanx also offers really good rates but they only deal in 8 currencies and to get the physical cash, you need to withdraw it from a local ATM with the debit card that they provide.

For a more detailed look at the above and why travellers cheques are pretty much useless these days, check out my post about the best foreign exchange options for travellers.

When to exchange money for travel

When to exchange money is a question that’s asked by many travellers but it’s a game best not played since you’re essentially trying to time the market. The reason it’s become a bigger issue as of late is because of Brexit. Once the vote was confirmed to separate, the British Pound dropped 10% overnight. Let’s be clear, such shifts in the value of currencies are quite rare. If you were planning to travel to England soon, this worked in your favour but in general, you shouldn’t try to time the market.

If you still insist on trying to get the best rate on cash but you don’t know when to exchange money, I suggest dollar cost averaging. That means you would purchase a set amount of cash a few times leading up to your trip. So let’s say you exchanged $1000 worth of cash 3 different times at the rate you got each time was .90, .85, .95. In this example, your average cost would end up being .90. You didn’t buy at the lowest rate nor did you buy at its peak – you paid the average.

The problem with this strategy is that you’re exchanging money in advance at home where rates aren’t very good. As you’ve read, the best way to exchange money is a combination of using credit cards and local ATMs so why bother trying to time the markets?

Check out other parts of the series below

Part 1: Budgeting for a trip
Part 2How to pick a vacation destination
Part 3How to find cheap flights
Part 4: How to save money on hotels
Part 5: How to eat cheap when travelling
Part 6The best way to exchange money
Part 7: The basics of travel insurance
Part 8: Sticking to your travel budget

**The author of this post is an employee of Rogers, but not an official spokesperson