First, some news…
Somehow, we convinced an actual company that our ramblings are interesting, and we’re super excited to have a post on the Travel Underwriters Blog, which
will be posted today was just posted. Go check it out: we talk about the tips we use to save money for travel, and they’re pretty damn good, if I do say so myself.
And since we’re on the topic of money, I thought I’d tackle another financial issue that comes along with globetrotting: the darned ATM fees…
On our recent trip to Guatemala, we hit up the ATM three times over ten days, and it ended up costing us $13 in fees from our Canadian Bank (RBC), plus another $10 or so charged by the ATM from which we withdrew the cash (not to mention the foreign exchange rate). $23 for three ATM withdrawals seems INSANE to me, so I started rumbling around on the interwebz looking for better options.
Nomadic Matt has a great post about how to avoid bank fees while traveling, and while it contains some information relevant to Canadians, the article is mostly applicable to Americans. And unfortunately, Canada doesn’t have a magic Charles Schwab-esque account.
While Canada’s big banks don’t offer a completely fee-free option for Canadians, there are some not bad options, and some banks are better than others. I’ve put together a report card of sorts, ranking Canada’s Big Five banks, plus a few outliers.
My criteria are simple: monthly account fee, foreign withdrawal fee (charged by the Canadian bank and the foreign bank), and total user cost in a (simplified) fictitious situation I’ve created to compare the real costs of the different accounts.
Here is the fictitious example against which I’ll compare the bank accounts:
Jane is planning a RTW trip, and has saved $30,000 for the trip, plus enough money for travel insurance and a flight to her first destination. She plans to spend $2,000 per month (for the purpose of this experiment, we’ll assume she spends exactly $2,000 per month, including all flights). Starting out in Vancouver, she will fly to Mexico, and take three months to travel overland down to Panama, and then fly to Bogota. In South America, she’ll take another three months and go as far south as Buenos Aires/Santiago, and then fly to New York for a few days, before going to Europe. In Europe, she’ll hit up the UK, France and Spain in Western Europe, then take a cheap flight to Berlin, and take the train through Poland, Czech, Hungary, Romania, and the Ukraine. After three months in Europe, she’ll fly to Kenya, where she’ll spend three months traveling around Kenya, Uganda, Rwanda, and Tanzania. She’ll then grab a flight to Delhi, and plans to spend a month in India. For her final two months, she’ll travel through Thailand, Vietnam, Cambodia, and Laos. Let’s assume, for simplicity, that Jane withdraws cash only once from every country she visits, and there is a $3.00 local ATM fee when it applies. Jane will visit 32 countries and make one withdrawal per country.
Without further adieu, here’s how Canada’s big banks (plus a few) perform on Jane’s RTW journey.
This one seems like a no-brainer. The self-proclaimed “world’s local bank” surely must allow loyal customers the courtesy of using its global network of ATMs without gouging them with fees, right? Sadly, this has not translated into a no fee policy for foreign ATMs, unless you’ve got some big time cash to invest upfront with HSBC. The HSBC Premiere Account is great if you have $100k in personal assets with HSBC: it gives you the privilege of accessing your money for free at any of HSBC’s ATMs in Canada and worldwide. For those of us that don’t have $100k to invest with HSBC, there’s the HSBC Advance Chequing Account. The Advance account is $25 per month, which is waived if you have $25,000 with HSBC (in accounts or investments), and allows you to withdraw cash for free from HSBC machines worldwide. However, it doesn’t take care of the fee charged by the local ATM, even – apparently – if it is an HSBC machine.
Example: Jane puts all $30,000 of her savings in the HSBC account. Withdrawing $2,000 per month means HSBC will waive the fee for the first two months; Jane will have to pay the $25 monthly fee for the remaining 13 months of her trip ($325). Jane will be able to use her HSBC ATM card without home bank fees when she is in Mexico, Guatemala, Nicaragua, Panama, Columbia, Peru, Chile, Argentina, the USA, the UK, France, Spain, Germany, Czech Republic, Kenya, India, Thailand, and Vietnam. This is assuming she’ll always be able to find an HSBC ATM when she needs cash.
She won’t be able to use her card for free in Belize, Honduras, Costa Rica, Ecuador, Bolivia, Poland, Hungary, Romania, Ukraine, Uganda, Rwanda, Tanzania, Cambodia, and Laos. Assuming she uses the card once per country, and the withdrawals cost $3.oo per use (which is what HSBC charges for withdrawals from international ATMs), this will cost her $42. Additionally, Jane will be charged by the local bank every time she makes a withdrawal. At 32 withdrawals, she will pay $96 to the local banks.
Excluding foreign exchange rates, Jane’s total cost to bank with HSBC over the course of her 15-month trip is $461.
BMO’s Premium Plan costs $25.00 per month, which includes five international debit transactions per month using non-BMO ATMs on the Cirrus (Mastercard) network. However, Jane will still have to pay whatever the local ATMs charge. This account also includes unlimited debit transactions at merchants, which will be helpful for Jane when she is in the US, UK, and some of western Europe. BMO waives the $25.00 monthly fee if you maintain a minimum $5k balance throughout each month.
Example: Jane puts all $30,000 in the BMO account. Withdrawing $2,000 per month means BMO will waive the fee for the first twelve months; Jane will have to pay the $25 monthly fee for the remaining three months of her trip ($75). Jane will be able to use her card pretty much everywhere; the Cirrus network is in more than 200 countries. She’ll still be charged by the local ATMs, which we’re assuming will be $3 per time, for a total cost of $96. If Jane needs to make more than five withdrawals per month, she’ll be charged; BMO seems to charge between two and five percent of the withdrawal value.
Excluding foreign exchange rates, Jane’s total cost to bank with BMO over the course of her 15-month trip is $171.
TD Canada Trust‘s Select Service is similar to the BMO account, but doesn’t limit the number of foreign withdrawals you can make, as long as they are on the Plus (Visa) network. Again, it doesn’t do anything for the withdrawal fee from the local bank, and the monthly fee is $29.95, which is waived with a $5,000 minimum balance.
Example: Jane puts all $30,000 in the TD account. Withdrawing $2,000 per month means TD will waive the fee for the first twelve months; Jane will have to pay the $29.95 monthly fee for the remaining three months of her trip ($89.95). Jane will be able to use her card pretty much everywhere; like the Cirrus network, the Plus network is widely available. She’ll still be charged by the local ATMs, which we’re assuming will be $3 per time, for a total cost of $96. The difference between the BMO account and the TD account is that Jane can make unlimited withdrawals.
Excluding foreign exchange rates, Jane’s total cost to bank with TD over the course of her 15-month trip is $185.85, which is more than with BMO, but includes a bit of room for error if she needs to make more frequent withdrawals.
Scotiabank is the best option if the bulk of your travel is within the 40 countries that have Global Alliance ATMs. The nice thing about the alliance is you pay neither fees from your home bank (in this case, Scotia), nor local bank fees. It’s free! Scotiabank has two basic options, and I’ve done the math for both.
The Basic Banking Account is $3.95 per month, and includes 12 transactions per month, including transferring money from accounts and paying bills. The Basic Banking Plan is $8.95 per month (waived with a $2,000 minimum balance), and includes 25 transactions per month.
Example 1: Jane puts all $30,000 in the Scotiabank Basic Banking Account. There is no option to have the fees waived for this account, so the account will cost Jane $3.95 per month x 15 months = $59.25. Jane will be able to bank for free in Mexico, the US, Chile, Peru, Germany, Poland, the UK, Germany, Spain, France, Ukraine, Kenya, Tanzania, Uganda, and India. She won’t pay a fee to Scotiabank or the local ATM, as long as she uses machines within the Global Network.
She’ll have to pay Scotiabank and local ATM withdrawal fees in 18 countries that don’t have Global Alliance ATMs: Belize, Guatemala, Honduras, Nicaragua, Costa Rica, Panama, Colombia, Ecuador, Bolivia, Argentina, Czech, Hungary, Romania, Rwanda, Thailand, Vietnam, Cambodia, and Laos. Given that she’ll be charged both by Scotiabank and the local banks, and the Scotiabank fee is $5 per transaction for withdrawals outside the alliance, she’ll pay $8 per withdrawal x 18 withdrawals = $144.
Excluding foreign exchange rates, Jane’s total cost to bank using Scotiabank’s Basic Banking Account over the course of her 15-month trip is $203.25. However, if she goes over the 12-transaction limit per month (i.e. continuing to pay her bills at home, etc.) the cost will go up.
Example 2: Jane puts all $30,000 in the Scotiabank Basic Banking Plan. Withdrawing $2,000 per month means Scotiabank will waive the fee for the first 14 months; Jane will have to pay the $8.95 monthly fee for the remaining one month of her trip ($8.95). Just like in the above example, she’ll be able to bank for free in some countries, and will have to pay ~$8 per withdrawal in others ($144).
Excluding foreign exchange rates, Jane’s total cost to bank using Scotiabank’s Basic Banking Account over the course of her 15-month trip is $152.95. This option is cheaper, and also allows up to 25 transactions per month.
RBC & CIBC
RBC has a similar plan to the TD plan, but unfortunately does not waive the ~$30 monthly fee with a minimum balance; you need to have multiple RBC products for a fee discount, and even then the fee is still more than $20 per month.
CIBC seems to be lacking any good options: I couldn’t find any accounts that offer free international withdrawals.
ICICI is the Canadian subsidiary of the synonymous Indian bank, and it seems to be a great option for travellers…at first. The HIVALUE Plus account is $9.95 per month, with no option for a fee waiver with minimum balance. However, they don’t charge international withdrawal fees, leaving you to pay only the local ATM fees.
Example: Jane puts all $30,000 in the HIVALUE account. There is no option to have the fees waived for this account, and so the account will cost Jane $9.95 per month x 15 months = $149.25. Jane will only have to pay ATM withdrawal fees from the local banks. At 32 withdrawals x $3, this would cost $96.
Excluding foreign exchange rates, Jane’s total cost to bank using ICICI over the course of her 15-month trip is $245.25.
And the Winner is…?
The cheapest option is Scotiabank’s Basic Banking Account. However, what if you aren’t planning on going to the same countries as Jane, and don’t plan on hitting up many of the countries with Global Alliance ATMs?
The second best bet is TD. While the TD option is slightly more expensive than the BMO account, it gives more flexibility if you need to make more withdrawals. I think TD and Scotiabank offer the best bets, but I wonder if a combination would work better?
Example 1: TD Select Plus Scotiabank Basic Banking Account
Jane puts $29,500 in the TD account and $500 in a ScotiaBank Basic Banking Account ($3.95 per month x 15 months = $59.25). She plans to transfer money between the account using an Interac email transfer ($1.50 per transaction; let’s say she needs to transfer money five times =$7.50)
Jane will be able to bank for free in Mexico, the US, Chile, Peru, Germany, Poland, the UK, Germany, Spain, France, Ukraine, Kenya, Tanzania, Uganda, and India. She won’t pay a fee to Scotiabank or the local ATM, as long as she uses machines within the Global Network. In the 18 countries that don’t have Global Alliance ATMs, Jane will use her TD card. She won’t pay any fees to TD, but will be charged the $3 local fee per transaction (18 transactions x $3 per transaction = $54).
Jane’s costs in this scenario are the $54 in transaction fees, $7.50 in Interac transfer fees, $59.25 in Scotiabank account fees, and the TD banking fees: if Jane puts $29,500 in the TD account, withdrawing $2,000 per month means TD will waive the fee for the first twelve months; Jane will have to pay the $29.95 monthly fee for the remaining three months of her trip ($89.95). The total costs are $210.70 (I realize the math isn’t perfect, as she’d need to shift money from the TD account to the Scotiabank account; she may be charged the TD monthly fee sooner than I’ve allowed for in this calculation).
Example 2: TD Select Plus Scotiabank Basic Banking Plan
Jane puts $28,000 in the TD account and $2000 in a ScotiaBank Basic Banking Plan. She plans to transfer money between the account using an Interac email transfer ($1.50 per transaction; let’s say she needs to transfer money 10 times =$15)
Jane’s ATM costs will be the same as in the above example: $54. Her Interac transfer fees are doubled ($15), which will allow her to maintain the minimum required balance in each account for as long as possible ($5000 in the TD account, and $2000 in the Scotiabank account).
Let’s assume that Jane does a good job at maintaining minimum balances in each account until she needs to start spending her last $7000 ($5,000 in the TD account and $2000 in the Scotiabank account). Using an oversimplified calculation, Jane will have to start paying the TD and the Scotiabank monthly fee when she has less than $7000 left, which will be after 11 months. The cost for both fees for four months is [ (8.95 x 4) + ($29.95 x 4) = $155.66. Jane’s total cost in this scenario is $155.66 + $54 + $15 = $224.60
Personally, I think we are going to ditch RBC for the TD Select Service Account (plus it comes with a points credit card and other goodies). We have enough in savings that we can keep a $5k minimum balance, and although it works out being slightly more expensive than using Scotiabank for Jane, I think it is the best bet for worldwide travel, and I know we won’t always be traveling in Global Alliance countries. If I knew the majority of my travel was going to be within the countries covered by the Global Alliance, or couldn’t cough up the $5k to keep the monthly TD to zero, I’d absolutely go for Scotiabank.
Disclaimer: Before you make any life-altering financial decisions based on this blog post (hot tip: never make life-altering decisions based on any of our blog posts), you should probably check my math. A mathematician, I am not. You may also want to check with the bank, as I’m also not a banker, nor a financial expert. So basically what I’m getting at is this: follow my advice at your own risk, and don’t blame us if things don’t work out.