Best exchange rate for regular US$ to CA$ transactions?
August 1, 2007 11:46 AM   Subscribe

I live in Canada and do contract work for a US company. How do I get the best exchange rate for regular currency exchange transactions?

Currently, every two weeks, around US$4,000 is wired from the US into a US$ bank account at my Canadian credit union. I usually wait for US$10,000 to accumulate so that I can get the preferred rate, and then have my credit union to do the currency exchange into a CA$ account. Does anyone have any suggestions for how I can change this process to get the best exchange rate possible? If possible, I'd like to avoid having to wait for US$10,000 to accumulate so that I have access to the funds more quickly.

Please not that, aside from setup, this must all be doable over the phone/Internet, because I live in a remote location and am only in the nearest city about once every four to six weeks.

Also, does anyone have any suggestions for avoiding or reducing the $28 wiring fee (aside from using cheques, which is much too slow).
posted by Emanuel to Work & Money (8 answers total) 2 users marked this as a favorite
For the wiring fee, TIPANET has a low per-transaction fee (£8 in the UK) that's worth checking out. We have it in the UK at the Co-operative Bank, so your credit union may be able to offer it as well (it works for Canada and the US).
posted by ukdanae at 11:53 AM on August 1, 2007

$28 is a pretty high wire fee--I was paying $10 at my bank, until my financial planner had them waive the fees in the interests of making me happy. (The fact that I'd just deposited quite a bit of money, made some investments and spouted the word mortgage repeatedly no doubt had something to do with their desire to make me happy.) If it's a regular, recurring transfer, they might be willing to lower or waive the fee for you--can't hurt to ask.
posted by jacquilynne at 11:57 AM on August 1, 2007

Emanuel, I use cheques from US clients and they clear right away. Is your bank placing a hold on the cheques? Perhaps you can talk to them about that.
posted by acoutu at 12:41 PM on August 1, 2007

Response by poster: acoutu: Because of my location, cheques are inconvenient. I can only get my mail once a week or so, and then I would have to mail the cheques to my credit union (which takes about three days to arrive). Between that delay and the general delay of mail from the US arriving (which I've found usually takes about a week or more), that can be 2-3 weeks right there. Ontop of that, my credit union holds foreign checques for three weeks. So that can be six weeks before I actually have access to the funds! You're right, I probably could talk to my credit union about the holds, since this is regular and no cheque has ever bounced, but even so the delay and inconvenience is too much. I'd rather pay the $28 wiring fee.
posted by Emanuel at 12:52 PM on August 1, 2007

Have you looked at XEtrade? I don't know if they will transfer funds between a Canadian CAD account and a Canadian USD account.
posted by oaf at 12:59 PM on August 1, 2007

Thanks for explaining. I didn't consider that you might live in a remote location. Hmm. I wonder if you could talk to the credit union about accepting cheques directly. Perhaps your clients could be directed to send the cheques to the bank.

Also, could the clients do PayPal or email money transfer? Big businesses might not be on board with that, though.

You might also want to look into factoring. This is where you give the factoring company your invoices and they pay you a certain amount up front. You usually sell your accounts receivable at a discount of 2% to 10%. Granted, on a $4,000 payment, this would be $80 to $400. But, in some cases, getting your money upfront might give your business economic leverage to earn more money from other sources, offsetting that cost. Enterprise Development Canada's page on factoring has a contact form:
posted by acoutu at 2:11 PM on August 1, 2007

I've been in this precise situation, Emanuel.

a) Talk to your credit union. If you don't have a personal relationship with a business banker there, make one. Explain your situation, and inquire about options. Banks like businesses. They may have ideas none of us will come up with.

b) You've noticed, I'm sure, the continually rising value of the Canadian dollar - this means, among other things, that the longer your money is in US funds, the less CAD you're going to get from it. It is in your best interest to make the conversion as soon as possible, even if that means a higher number of exchange transactions.

The trend over the past few years is that you lose 0.75c CAD/USD every month, which means you lose $30 CAD effective value per month on US$4000. Or, to think of it another way, you're paying CA$1/day every day you don't convert US$4000 to CAD.

So, keep that in mind. I'm sitting here messing with the math, and the difference in rates between the $10k+, the < $10k, and the rate from an outside institution (which you'd definitely incur extra fees for transferring, wiring, etc) must be pretty dramatic to justify>
I estimated that it would be $25, in total (i.e. transfer fees, exchange fees, etc.), to use an outside exchange house, which is probably conservative, and that it costs you $5 to use the bank's services.

I also made some assumptions about rates given my personal experience with sub-$10k transactions with a Bank of Montreal business account. They may be entirely wrong, but I feel like they are okay.

- the bank's < $10k rate is 0.994 of market ratebr> - the bank's $10k+ rate is 0.996 of market rate
- the outside house's rate is 0.998 of market rate
- the fees are as above
- the CAD/USD market rate trends as above

After 8 weeks,
- If you convert only in batches of US$10k, and use the bank, you have CA$20,837.83
- If you convert only in batches of US$10k, and use the outside institution, you have CA$20,839.70
- If you convert every time you get money, and use the bank, you have CA$20,847.65
- If you convert every time you get money, and use the outside insitution, you have CA$20,831.64

- unless you can find a great deal on exchange rates, or your credit union is gouging you unreasonably, there is probably not much money you can save on trying to find a marginally better rate somewhere. The amounts involved are simply too small to benefit from too much shopping around.

- you may as well convert your money immediately upon receipt. Do the math, for sure, (here, have a spreadsheet) but often waiting doesn't help, especially in the current exchange situation.

This is all fairly conservative in my mind. You should be able to do even better if you talk to your CU. My banker at BMO has been absolutely great to me through all of my crazy foreign exchanges and random requests while abroad.
posted by blacklite at 2:37 PM on August 3, 2007 [1 favorite]

Sorry about all those weird line breaks, apparently Metafilter doesn't like < in lines all by itself.
posted by blacklite at 2:38 PM on August 3, 2007

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