F. Financial Literacy · Money and Finances: Payments, Financial Plans, Budgets, Interest and Smart Spending

Ways to Pay When Other Currencies Are Involved

F1.1 A1About 45 minutes

Learning goals

I can describe the main ways to pay when buying something in another currency.
I can explain advantages and disadvantages of cash, debit cards, credit cards, prepaid travel cards and digital wallets.
I can calculate the real cost in Canadian dollars, including exchange rates and fees.
I can choose a good way to pay for a given situation and explain why.

Words to know

currency
The kind of money a country uses, like the Canadian dollar (CAD), the US dollar (USD) or the euro (EUR).

exchange rate
How much of one currency you get for another. Example: 1 USD = 1.38 CAD.

foreign transaction fee
An extra charge, usually a percent, that many cards add when you pay in another currency.

prepaid travel card
A card you load with money ahead of time, often in one or more foreign currencies. You can only spend what is loaded.

dynamic currency conversion
When a store or machine outside Canada offers to charge you in Canadian dollars using its own exchange rate, which is often worse.

digital wallet
An app on a phone or watch that stores card information so you can tap to pay. It uses the fees and rates of the card linked to it.

Remember from Grade 7

In Grade 7 you converted money between Canadian dollars and other currencies. You learned that banks sell foreign money at a higher rate and buy it back at a lower rate, and that some cards add a foreign transaction fee.

This year you'll look at the ways to pay when another currency is involved, and weigh the advantages and disadvantages of each one.

A souvenir in Vermont

Maya's family is driving to Vermont, in the United States, for a long weekend. Maya sees a hoodie for 60 USD. She could pay with US cash, with her parent's credit card, or with a prepaid travel card. The store clerk even asks, "Would you like to pay in Canadian dollars?"

Each choice gives a different price in Canadian dollars. Which one is best? It depends on the rates, the fees and what matters most to the family: cost, safety or convenience.

The main ways to pay

Cash in the foreign currency. You buy it at a bank or exchange booth before you go (or at an ATM when you get there).
Debit card. You can use it at an ATM to get local cash, and sometimes to pay in stores. Banks often charge a fee for using an ATM outside Canada, and the money is converted at the bank's rate.
Credit card. Accepted in many places around the world. Many cards add a foreign transaction fee (often a few percent). Some cards charge no foreign transaction fee.
Prepaid travel card. You load it before the trip, often in the foreign currency, so you know your rate ahead of time. You can't spend more than you loaded.
Digital wallet (tap with a phone or watch). Handy, but it uses the card that is linked to it, so the same rates and fees apply.
Shopping online from another country. You pay in that currency with a card. The price may not include shipping, and you may have to pay duties and taxes when the package crosses the border into Canada.

All rates and fees in this lesson are example amounts. Real ones change often and are different at each bank and card company.

Way to pay	Advantages	Disadvantages
Foreign cash	Accepted at small shops and markets; easy to see what you've spent; no card fee at the till	Can be lost or stolen and not replaced; bank sell rate is higher; leftovers lose value when sold back
Debit card at an ATM	Get local cash when you need it; money comes from your own account	ATM fees for each withdrawal; conversion fee; card may not work everywhere
Credit card	Widely accepted; usually protected against fraud; good record of spending	Foreign transaction fee on many cards; interest if the bill isn't paid in full; easy to overspend
Prepaid travel card	Rate locked in when you load it; can't overspend; not linked to your bank account	Loading and reloading can have fees; leftover money must be converted back
Digital wallet	Fast; card number isn't shown to the store	Needs a working phone; same fees as the linked card; not accepted everywhere

Every method has trade-offs. The best choice depends on the situation.

Worked example

Example 1: The 60 USD hoodie, four ways

Use these example rates. Find the cost of the 60 USD hoodie in CAD for each choice.

Cash bought at a bank: 1 USD = 1.42 CAD.
Credit card with a 2.5% foreign transaction fee: card rate 1 USD = 1.38 CAD.
Credit card with no foreign transaction fee: 1 USD = 1.38 CAD.
Paying in CAD at the store (dynamic currency conversion): 1 USD = 1.45 CAD, no card fee.

Cash: 60 × 1.42 = 85.20 CAD.
Card with fee: 60 × 1.38 = 82.80. Fee: 2.5% of 82.80 = 0.025 × 82.80 = 2.07. Total 84.87 CAD.
Card with no fee: 60 × 1.38 = 82.80 CAD.
Paying in CAD at the store: 60 × 1.45 = 87.00 CAD.

From cheapest to most expensive: no-fee card $82.80, card with fee $84.87, cash $85.20, paying in CAD at the store $87.00. When a store outside Canada asks if you want to pay in Canadian dollars, it's usually cheaper to say no and pay in the local currency.

The same 60 USD hoodie on a number line of CAD prices. The no-fee card is cheapest, and saying "yes" to paying in Canadian dollars at the store is the most expensive.

Worked example

Example 2: Getting cash from an ATM

Maya's dad takes out 200 USD from an ATM in Vermont with his debit card. His bank uses 1 USD = 1.38 CAD, adds a 2.5% conversion fee, and charges $5 CAD for each ATM withdrawal outside Canada. Compare with buying 200 USD at the bank before the trip at 1.42.

Convert: 200 × 1.38 = 276.00 CAD.
Conversion fee: 2.5% of 276.00 = 6.90.
ATM fee: 5.00. Total: 276.00 + 6.90 + 5.00 = 287.90 CAD.
Bank before the trip: 200 × 1.42 = 284.00 CAD.

Buying cash before the trip costs $3.90 less here. But the ATM is handy if they run out of cash. Since the $5 fee is charged each time, one larger withdrawal costs less in fees than several small ones.

An ATM withdrawal step by step: convert, then add the percent fee, then add the fixed fee. Each step makes the total bigger.

Worked example

Example 3: Leftover money on a prepaid card

Maya's older brother loads a prepaid travel card with 300 USD at 1 USD = 1.40 CAD. He spends 260 USD. He converts the leftover 40 USD back at the buy rate of 1 USD = 1.34 CAD. How much does he lose on the leftover money?

Loading cost: 300 × 1.40 = 420.00 CAD.
The leftover 40 USD cost him 40 × 1.40 = 56.00 CAD.
Converting back: 40 × 1.34 = 53.60 CAD.
Loss: 56.00 − 53.60 = 2.40 CAD.

He loses $2.40 on the leftovers. He could keep the 40 USD on the card for a future trip instead, if the card allows it.

Worked example

Example 4: Shopping online from a US store

Jayden finds a jacket on a US website for 90 USD + 15 USD shipping. He'd pay with a card that uses 1 USD = 1.38 CAD and a 2.5% fee. A Canadian store sells the same jacket for $139.99 CAD with free shipping. Compare (before Canadian sales tax).

US store total in USD: 90 + 15 = 105 USD.
Convert: 105 × 1.38 = 144.90 CAD.
Fee: 2.5% of 144.90 = 3.6225 ≈ 3.62. Total: 148.52 CAD.
Canadian store: 139.99 CAD.

The Canadian store is about $8.53 cheaper, and there's no risk of extra duties or taxes at the border. A price that looks low in another currency isn't always a deal.

Questions to ask before you pay

Which currency will I be charged in?
What exchange rate will be used?
Are there fees: a percent, a fixed amount per use, or both?
What happens if the money or card is lost or stolen?
Will I have leftover foreign money?
Could this choice make it too easy to overspend?

Think it through

Multi-step money problems are easier when you write a plan first: "Convert, then add the percent fee, then add the fixed fee." Then check with an estimate: 60 USD is roughly 60 × 1.4 = 84 CAD, so answers near $85 make sense. Mathematicians plan, solve and look back.

Just for fun

Canada's $1 coin has a loon on it, so everyone calls it the loonie. When the $2 coin arrived in 1996, Canadians named it the toonie. Try asking a store clerk in Vermont for change in toonies and watch them reach for a dictionary.

Hands-on activity

Plan the payments for a trip

You need: paper, a pencil, a calculator, and a grown-up to help you look up today's exchange rate for one currency (on a bank's website or in the news).

Choose a destination outside Canada and its currency.
List five things you might buy there (a meal, a museum ticket, a souvenir, a bus pass, a snack) with a price in that currency. You can use prices from a website or make reasonable ones up.
For each item, choose the best way to pay (cash, card, prepaid card or digital wallet) and write one reason.
Using today's rate, find the total in CAD. Then add a 2.5% fee to the items you'd pay by card (if your example card has a fee).
Talk with your grown-up: Which method would you choose for safety? For lowest cost? For convenience? Are they the same?

What to look for: a clear table, conversions that make sense (check with an estimate), and reasons that mention cost, safety or convenience.

Your turn

Give one advantage and one disadvantage of carrying cash in a foreign currency.

A lunch costs 25 USD. You pay with a credit card that uses 1 USD = 1.38 CAD and adds a 2.5% fee. What is the cost in CAD?

The same 25 USD lunch is paid with cash bought at the bank at 1 USD = 1.42 CAD. Which is cheaper, the card or the cash, and by how much?

A store in New York asks if you'd like to pay a 40 USD bill in Canadian dollars. Its rate is 1 USD = 1.46 CAD. Your card uses 1.38 and adds a 2.5% fee if you pay in USD (no fee in this example if you pay in CAD). Which should you choose?

Why might a prepaid travel card be a good choice for a student on a school trip?

You take 100 USD from an ATM. The bank uses 1 USD = 1.38 CAD, adds a 2.5% fee and charges $5 per withdrawal. What does it cost in CAD?

Museum tickets in Paris cost 50 EUR. You pay with a card with no foreign transaction fee that uses 1 EUR = 1.60 CAD. What is the cost in CAD?

More practice: warm-up

Convert 10 USD to CAD at 1 USD = 1.40 CAD.

Which way to pay does not need you to exchange money before the trip: buying foreign cash or using a credit card?

What is a foreign transaction fee?

You buy 100 USD in cash at 1 USD = 1.42 CAD. How much do you pay in CAD?

If you lose it, which is usually easier to replace or cancel: cash or a credit card?

More practice: on your own

A jacket costs 80 USD. You use a card with rate 1 USD = 1.38 CAD and a 2.5% fee. Find the total in CAD.

A book costs 45 USD + 10 USD shipping on a US website. You'd pay with a no-fee card at 1 USD = 1.38 CAD. A Canadian store sells it for $72.99 with free shipping. Which is cheaper, and by how much?

Zoe loads 200 USD on a prepaid card at 1 USD = 1.40 CAD. She has 30 USD left and converts it back at 1.34. How much does she lose on the leftover money?

An ATM fee is $5 per withdrawal. Is it cheaper to take out 200 USD once or 100 USD twice? Explain.

Give one advantage and one disadvantage of paying with a digital wallet on a phone while travelling.

Challenge

A family expects to spend 1 200 USD on a trip. Compare the CAD cost of: (a) a card with rate 1.38 and a 2.5% fee, (b) a no-fee card at 1.38, (c) cash bought at the bank at 1.42. How much do they save with the best choice compared with the worst?

Card A has no annual fee but a 2.5% foreign transaction fee. Card B has no foreign transaction fee but a $120 annual fee. How much foreign spending (in CAD) per year makes Card B the better choice?

A hotel outside Canada offers to charge a 300 USD bill as 432.00 CAD. (a) What exchange rate is the hotel using? (b) If you pay in USD with a card at 1.38 plus a 2.5% fee, which choice costs less, and by how much?

Check your understanding

Quiz

A store outside Canada asks, "Pay in Canadian dollars?" What is usually the cheaper answer?

A 50 USD purchase is made with a card at 1 USD = 1.38 CAD plus a 2.5% fee. What is the total in CAD?

Which is a disadvantage of a prepaid travel card?

Why does taking cash out of an ATM in many small amounts cost more?

Which way to pay is usually the safest to carry if it might be lost?

A US website price is 100 USD plus 20 USD shipping. At 1 USD = 1.40 CAD with no fees, what is the cost in CAD?

For parents and teachers

Big idea: Ontario's Grade 8 expectation F1.1 asks students to describe advantages and disadvantages of methods of payment when dealing with multiple currencies and exchange rates. Converting currencies was taught in Grade 7, so the focus now is on comparing methods and their real costs.

How to help at home:

If you travel or shop online from another country, show your child the charge on your statement in CAD and work out together what rate and fees were used.
Talk about why you choose the methods you do: safety, cost, convenience, or habit.
Point out that the rates and fees in the lesson are examples. Real ones change daily and differ between banks and cards.

Common difficulties:

Forgetting a fee or applying it to the wrong amount. The percent fee is on the converted CAD amount; a fixed fee is added after.
Multiplying when they should divide. Foreign amount × (CAD per unit) gives CAD. Ask, "Should the CAD number be bigger or smaller?"
Thinking cheapest is always best. Safety and convenience matter too. This builds A1 skills: reasoning, making connections and justifying choices.