Fact
- There is an expense to converting Although you don't lose money when you "convert" Canadian loonies
into US dollars, 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
Canadian credit card in the US for US dollar purchases can be even
worse. By "shading" the exchange rate on your purchases in the
US , 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 loonies into US dollars:
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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 Canadian dollar credit card, find a credit
card that issues US dollar 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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If you have an account at a Canadian brokerage firm, they
may offer you competitive exchange rates as part of their
customer service to you, particularly if you already have
a US dollar account.
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US 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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Don't wait till you get to the US . . . most US banks will
not convert your Canadian loonies.
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Leave sufficient US dollars in the US to meet your currency
needs each year.
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