Foreign currency exchange is always an issue for Canadians who shop in the United States or make online purchases from U.S. based retailers.
Remember that the Bank of Canada rate you often see quoted on websites, in newspapers and on television is not the rate you will receive when exchanging your Canadian dollars for U.S. dollars (or vice-versa upon your return to Canada). When you exchange currency, it can cost you 2 – 3% of the amount you are exchanging, plus additional fees in some cases. This means that if the Canadian dollar and the U.S. dollar are at par, you will only receive about $.97 U.S. for every Canadian dollar you exchange.
Accordingly, it’s important to review your currency exchange options and find the method that best suits your needs. For your convenience, we have provided an overview of the following currency exchange methods, their pros and cons and who they may be most suitable for.
Banks
Banks generally charge high fees for exchanging currency, usually in the range of 3% of the amount you are exchanging. On the plus side, banks are fast and easily accessible venues for exchanging currency. If you don’t have time to waste and you are exchanging a relatively small amount of money on a one time basis, banks can be a good option.
Currency Exchange Kiosks
There are a number of boutique businesses that specialize in currency exchange located in and around most cities. These businesses often run out of small storefronts or kiosks, and can have slightly better rates than the banks. However, if you are pressed for time, you may not be able find one that is conveniently located.
Online Currency Exchange Services
Online currency exchange services are becoming increasingly popular. They often offer better exchange rates than both the banks and currency exchange kiosks. If you are exchanging currency online, make sure you are using a reputable website and understand how and when your currency will be delivered. If you exchange currency on a regular basis or are exchanging a significant amount of money, and don’t require your funds immediately, exchanging your money online may be a good option.
ATM Machines
If you’re already in the United States and need to access U.S. dollars quickly, ATM machines are always an option. However, it’s important to keep in mind that ATM machines charge relatively high fees for exchanging currency, in addition to flat fees of $2 to $4 per transaction. ATM machines should be viewed as a last resort for accessing U.S. cash.
U.S. Dollar Bank Accounts
If you cross border shop on a regular basis or are making a large purchase in U.S. dollars, you may want to consider opening a U.S. bank account to have U.S. cash at your disposal whenever you need it. Some Canadian banks allow you to open U.S. dollar accounts with no monthly fee and no minimum balance requirements. When the exchange rate is favourable, simply transfer money from your Canadian dollar account to your U.S. dollar account. Keep in mind that you will still have to pay relatively high bank currency exchange fees.
Canadian Dollar Credit Cards
Using your Canadian credit card to make in-store and online purchases from U.S. retailers may be the most convenient way to cross border shop. However, it’s important to keep in mind that your credit card company charges hefty fees to exchange currency, and you may be in for a surprise when you receive your monthly bill. If you are making a small purchase you may want to use your credit card. Otherwise, you may want to explore other options.
U.S. Dollar Credit Cards
If you are a frequent cross border shopper or are making a large cross border purchase, your best option may be to get a U.S. dollar credit card. Most Canadian banks offer them, although annual fees and terms vary, so it’s important to do your research before deciding on a card. Some cards even waive the annual fee if you spend a minimum amount in any year. The advantage of having a U.S. dollar credit card is that you can choose when you pay off your balance (so long as it is before your required payment date). This allows you to pay down your credit card when exchange rates are at their most favourable.
