Fact
- There is an expense to converting Although you don't lose money when you "convert" US dollars
into Canadian loonies, there is an expense that you need to be aware of.
Financial institutions "shade" the spot rate of the Canada/US exchange
rate and use that as another source of profits for their shareholders.
The way you can tell is to compare the exchange rate online or in
the newspaper with those posted at your local bank or at the "currency
exchange carts" at the airport. The difference can be significant.
In some cases, using your American credit card in Canada for
Canadian
dollar purchases can be even worse. By "shading" the exchange
rate on your purchases in Canada, the credit card companies make
a fortune and you have little or no idea. Next time you get
your credit card statement, look at the rate they exchanged your
purchase at and then go
online and find the historical rate . . . you may grimace. Here are some things you can do to reduce the expense when converting
your US dollars into Canadian loonies:
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Request your currency exchange provider to give you the "spot"
rate or as close to it as possible. The spot rate is what
the market is paying at that moment and the currency exchange
does not shade the rate at all.
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Accumulate your loonies together and convert in one lump
sum, rather than several smaller transactions.
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Avoid using your American dollar credit card, find a credit
card that issues Canadian loonie cards instead so you can control
the exchange rate better, rather than take the prevailing
rate the credit card company decides for that day.
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Avoid using your bank unless you have a good relationship
with your banker, then ask them to give you the "spot" rate.
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Avoid the currency exchange "carts" in the airports or be
sure to compare their rates to a discount currency broker
or the spot rate in the newspaper or online whenever possible.
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Avoid converting cash, as it is more expensive. Consider
travelers cheques, bank drafts, money orders or personal cheques
instead.
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Make sure you do comparative shopping, particularly if you
are exchanging large sums.
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Canadian casinos typically provide excellent exchange rates in
hopes you will leave some of it in their machines or at their
tables.
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Leave sufficient US dollars in the US to meet your currency
needs each year when you visit.
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