How to get the best exchange rate for a large USD->CAD transfer
August 17, 2015 10:07 AM   Subscribe

I'm about to receive the proceeds of a sale of inherited US property. I'd appreciate hearing your experiences about how to get the best exchange rate.

This will be a six-figure transfer, and there is a gap in the rate my bank quotes on its website compared to the current market rate that is worth several thousand dollars, which is real money to me. I have emailed my banker there about a better exchange rate. In the meantime, two questions:

1) Is it worth my trouble to go with a trader like XE (whose website is listing an exchange rate much closer to the going market rate) or Knightsbridge, or another that you have experience with, for the exchange?

2) The current plan is for the escrow lawyer to wire me the money (I trust them) to a US$ account I have with my Canadian bank and then sort out the currency exchange for the money. If I'm considering using a different trader for the exchange then my bank, should I figure out my preferred trader and set up an account with them first before receiving the wire?

You are not my banker, financial adviser, or currency trader, but your advice is still most appreciated!
posted by dry white toast to Work & Money (6 answers total) 3 users marked this as a favorite
Definitely shop around for the best rate! I would find the best rate I could and then ask my bank to match it. They definitely have some flexibility with large amounts.

Zenbanx just opened up in Canada and have pretty good exchange rates. I have obtained excellent exchange rates by using a brokerage account (I would guess under 0.001 for six figures), specifically Interactive Brokers, but that may not be worth your time to set up if you don't need a brokerage account.
posted by ssg at 10:37 AM on August 17, 2015

Set up a USD account with your bank for sure. And shop around. The banks, at least for retail transactions, do not provide a good retail rate *at all." Although it's for much smaller sums I typically go to a currency exchange place that caters to tourists. They have a much better rate.

Ideally I would have an American-denominated Forex account, but I typically need to convert the USD to pay for living expenses, and so cannot quite afford to keep the minimum balance needed, and pay the fees, to make it worthwhile. Having a Forex account will give you access to much better wholesale rates.

Is there any reason why you want to liquidate the American-denominated lump sum into Canadian dollars in the first place?

Having a large amount of USD on hand is a great opportunity, since you are going to lose a ton of money no matter what when you convert the money, and if you wanted to invest the money you'll have to pay to convert back to USD.

That said, the current exchange rate *should* stay the same until at least the election in October, or even possibly into 2016, depending on oil prices and whether or not the US decides to raise interest rates (it probably won't).

I would just be interested in know what you plan to do with the Canadian dollars, since they have such a much lower purchasing power than American dollars when it comes to investment.
posted by Nevin at 10:49 AM on August 17, 2015 [1 favorite]

Response by poster: Update, etc: I've heard from my bank that have a preferred exchange rate for larger sums that is much closer to the market rate, which is a relief, but I still want to educate myself on the options, so your experience is still welcome.

Much of the money is already earmarked for certain things, but I do plan to keep a significant chunk in US funds since I travel to the US a few times a year. Just sorting out what to do with the money I will be converting into Canadian $.
posted by dry white toast at 11:31 AM on August 17, 2015

My only other advice would be to not engage in currency speculation. That is, try not to spend too too much time trying to predict if and when the dollar is going to decline further against the US dollar. It just makes for anxiety and high blood pressure.

On the other hand I usually try to see what the dollar has been doing from Monday to Wednesday, since Friday close usually results in a dip or a surge (Monday is similar). But that's all the speculating I do.
posted by Nevin at 1:26 PM on August 17, 2015

One way to do this is called Norbert's gambit. Basically, you buy a stock that trades on both the Canadian and US exchange. Buy on the US market with your US dollars, then sell those shares on the Canadian exchange and get the Canadian dollars. Essentially, the market does the exchange for you, at very low cost. There are lots of snowbirds who do this.

If done correctly, this is the cheapest exchange. If you're unfamiliar with trading stocks, this may not be the best time to start.

Going to your bank and getting a quote from their trading desk isn't a bad way to do it either. It will be much better than what they quote online.

Do not bother trying to time the foreign exchange market. It's impossible to predict short term. Better instead to try for the smallest spread, by doing Norbert's gambit, above, or getting multiple quotes and being a bit pushy with your bank guy.

There are also special foreign exchange companies. Cambridge Mercantile is one. There are others. They will do a one off exchange for you.
posted by thenormshow at 2:05 PM on August 17, 2015 [1 favorite]

I opened an account with XE to transfer between an Austrian bank account and a U.S. Bank account. I did it all online as I was no longer in the United States. My transfers are monthly and much smaller than yours, three or four digits and I save a little on the wire fees and miscellaneous processing fees and getting a slightly better exchange rate than my banks. YMMV. But definitely shop around...
posted by ssri at 5:29 PM on August 17, 2015

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