Currency conversion - CAD to USD and vice versa

Currency conversion is one of the things folks want to know once in Canada. Even if you didn't immigrate from US it might be something good to know. I struggled a lot to find out the best option to do this conversion. So thought of sharing this with you.

Disclaimer - We are only stating our experience and recommending based on the research we did. We are not financial advisors and are not marketing for any financial firm.

It is very common for companies to have a US headquarter and as a result you could get your salary in USD. Almost all banks offer a USD currency bank account. (Read my other post for the same) However, you would need CAD for your daily usage in Canada.

Think of your investments in a Canadian brokerage firm. These firms allow investments in CAD and USD currency. Many people invest in both Canadian and US stock markets. So, you would want to know the best way to convert your CAD to USD and vice versa.

Two things to watch out 

1. Exchange rate - You don't get the same rate with every provider. 
1. Some of them have rounding rules. So if the real exchange rate (USD to CAD)  is 1.33 then they might just give you 1.3. 
2. Commission Fees - For every transfer, you are charge with commission fees. 

Some providers give you higher exchange rate but charge commission to make up whereas others do vice versa. So you need something that gives you the most optimal experience.

Option 1 - Xoom

I had used Xoom before for transferring USD to my Indian bank account and so it was something I tried first. Easy to register and more currencies are supported than CAD/USD. They charge transaction fees (depending on whether you use card or bank) and round as well. 

1. PROS - Very easy process and you get the money instantly. Good in case of an emergency.
2. CONS - Not the best exchange rate and the impact is higher when you transfer larger amounts.

Option 2 - Norbert's Gambit

This has proven to be one of my biggest learning.  You need to have an investment account for this one. 

What it is - If you are converting from USD to CAD then you would purchase an ETF - DLR.U.TO.  This is an ETF composed completely of cash equivalents and traded in USD currency.  So a low risk ETF with very less volatility. For simplicity if the price of a single quantity of dlr.u.to is 10 USD and you want to convert 1000 USD then you would purchase 100 quantity of that ETF.  You would then call your investment firm to journal dlr.u.to to dlr.to. What this means is that your investment firm would simply take the quantity you bought and assign them to dlr.to. This will take a few days. But now, you will see DLR.TO instead of DLR.U.TO.  You can then sell dlr.to etf to get Canadian cash.  

For converting cad to USD,  buy DLR.TO ETF with Canadian dollars,  have your investment firm journal it to DLR.U.TO.  After a few days, you can sell DLR.U.TO and get USD.

PROS -

1. You get better rates.

2. Most investment firms offer these ETFs.  So, to specifically convert currencies,  you don't have to open a new account. 

CONS - 
1. You will have to wait a few days for the process to complete. 

To put things in perspective,  I got an exchange rate of 1.32 with Norbert's gambit and the fees I paid was just about 8 CAD to convert 6000 USD. I had tried Xoom before and it gave me an exchange rate of 1.3 CAD. So with Norbert's gambit,  I was able to get 112 CAD more. This might sound complicated for a few folks but once you have done it, you wouldn't regret it.

Ultimately,  you should know that there are multiple options. You can use what works best for you.

Investment transfer - US to Canada

If you have lived for several years in the US, chances are that you also have investments in financial institutions like Fidelity Investments, Vanguard etc. We are referring to the non-retirement investment accounts and not retirement plans like 401K, IRAs etc. In this blog we are referring to non-retirement, investment account where you might have stocks, ETFs, mutual funds or fixed income instruments like bonds, CDs. When we were planning to immigrate to Canada, very few people knew anything about transferring assets. Online research didn't give us good results. Hence the blog! If you decide to immigrate permanently from the US to Canada, here are few things that you should know.

Can you keep your investments in the US?

1. If you are not a US resident then you cannot maintain your investment account in the US long term.  You should plan to move your investments to Canada. 
2. If you have resided in the US for part of the year then you would be paying US taxes. 
3. You can fill out the W8 form that states that you are no longer a US resident.
4. Change your address so that your communications are not sent to your old address.

Some facts

1. You can trade on major US exchanges like NYSE, NASDAQ etc.
2. You can buy and sell securities in USD currency.
3. You can have a investment account in Canada with the following features -
• You could buy securities on US exchanges in USD currency.
• You could buy securities on Canadian exchanges in CAD currency.

What investments can be transferred to the US?

You don't have to sell ALL your US investments and transfer the proceeds to your Canadian account. It is possible to retain some of the investment types and the rest unfortunately have to be liquidated.

1. Stocks, ETFs and bonds can be transferred from your US brokerage firm like Fidelity to a Canadian investment firm like Questrade.
• Your Canadian investment firm should also hold that security. For example, if you had FB stock in your US investment firm like Fidelity and are trying to transfer it to Questrade i.e. Canadian investment firm then you can only do it if Questrade holds the stock. Usually the popular stocks and ETFs are held by all major firms. 
• If the Canadian firm doesn't hold it then you can either liquidate it or try to find another firm that holds the security.
2. Mutual fund securities are something that you wouldn't be able to transfer.
• The prospectus for most US mutual funds usually states that account owner resides in the US. That is why the US mutual funds typically cannot be transferred to the Canadian investment firm.
• You typically need to liquidate mutual funds and transfer the proceeds to the Canadian investment firm.

What is usually the process?

1. You have to initiate the transfer of assets process via the Canadian investment firm. 
1. Depending on the Canadian investment firm you choose, you will be able to e-sign and apply or send paperwork manually to allow the transfer. More on how to choose a good Canadian investment firm!
2. If you have stock, ETF and bonds then you could list them and have them transferred in kind.
3. Your Canadian investment firm will send the request to your US investment firm and they may reach out to you for confirmation.
4. Once confirmed, the securities will be transferred to you in kind.
• You should have the record of the transaction in your US and Canadian accounts.
• Since you are dealing with USD currency all the way there should not be conversion.
• You just need to ensure that the quantity is correct. In other words if you had 10 shares of FB trading on NYSE then 10 should be transferred.
5. If you wish to liquidate the securities then the US firm typically could do it for you. The proceeds can be transferred to your Canadian firm.
6. It usually takes about a month for the end-to-end process. 
7. Transfer didn't have charges from the Canadian firm but the US firm did charge a nominal fee of 10 USD since we were transferring partial quantity. 
8. Some Canadian firms also give a rebate if you transfer more than 25000 USD.
9. All this transfer process was online. But if you choose an investment firm where the process isn't online, you might have to mail the application and it might take longer.

Hope this gives you relief and information on transferring assets. You need to be patient for this process but the result is worth it because you would ultimately have all your investments in Canada and tax filing would be simplified for future years. For the 1st year, you might have to do both US and Canada taxes because you might most likely have resided in both countries but the subsequent years would just be Canadian taxes!

Disclaimer - We are only stating our experience and recommending based on the research we did. We are not financial advisors and are not marketing for any financial firm.

You may also be interested 

1. How to open a Canadian bank account? Read along.
2. Basics of Canadian banking

Money transfer - USA to Canada

Transferring money from institutions in USA to financial institutions in Canada is one of the things, for which there are not many pointers online or otherwise. There are several scenarios when you would want know more about this one.

For what scenarios would you want to know about this?

• If you are immigrating from USA to Canada and want to move your assets permanently.
• If your company offers some stock plans that are managed by financial institutions like Fidelity Investments. You can encash the stocks and want to get the proceeds in your Canadian account.

Recapping some basics 

• You can create a bank account in Canada that holds the USD currency.
• You can transfer USD into this account and can convert to CAD if you want to.

Depositing cash

You can deposit US dollar bills in a traditional bank like Scotiabank that has retail branches. That's where some of the online banking services cannot help! The tellers can advise and help you.

• If you open up a USD account in your Canadian bank then you can deposit it directly. You don't lose money at all in this case. 
• You can also convert the bills to Canadian dollars and deposit it in your account. Note that you don't get the best exchange rate in banks. If you don't plan on creating a USD account then you could can also get Canadian foreign exchange in USA.

So if you don't need the money immediately then you might want to keep it in the USD account in your Canadian bank. At a later date, you can convert it if you want to.

Wire transfer

You can initiate a wire transfer from your Canadian bank like Scotiabank. This is where some of the online banks like Tangerine cannot help.

• There will be wire transfer charges per transfer. So depending upon the banks in question, plan on doing a one-shot transfer. 
• Please try a small amount like 100 USD first before trying out the entire amount. 
• Some of the wire transfer systems are faulty. (Read out experience below) 
• It might convert USD to CAD and back. So that double conversion means that you would lose money.
• While you get the amount instantly there is a risk of losing money if systems are faulty. Decide accordingly.

Depositing the check

Since you can open up a USD account in your Canadian bank then this is a very viable option. You can deposit say your Bank of America check in your Scotiabank USD account. For amounts more than 10K USD, usually the bank would put an hold for the amount for around 20-30 days. This means that the amount is unavailable for those many days. But the good thing is that there is no risk of conversion or losing money!!!

What was our experience?

Given that we were in the US for a little over a decade, we had a lot of savings. When we were in the US, we couldn't find information on how to go about this. We reached out to our Bank of America branch and they told us we could wire transfer the money. We also called up the customer service of  several Canadian banks to check our options. We didn't get many definitive answers. Considering that we were planning to get visitor's visa to the US in case we couldn't move money online!

We didn't have Canadian dollars and so we took around 10K USD in cash. We were planning to transfer the remaining via wire transfer. When we landed in Canada, the bank told us that we could also open up a USD account. But remember that the credit cards and debit cards are associated with Canadian dollar currency and not USD. So we chose to just deposit 5K USD in the account and converted the remaining 5K USD into CAD.

As for the other money, we initially tried a wire transfer of 100 USD from our Bank of America account to Scotiabank's USD account. We were charged 45 USD by Bank of America and we were hoping that 100 USD showed up in Scotiabank. But what happened was unexpected! 100 USD showed up in Scotiabank as 83 USD! When Scotiabank troubleshooted this problem, it seemed like their system had a glitch and converted USD to CAD and then back to USD. This double conversion caused us to lose 17 USD. We had Scotiabank reimburse this money but the lesson to be learnt from this is that if you plan to wire a huge amount, try it out with a small amount first before you do the whole thing.

Now, you might have a different experience with other institutions but beware of the charges and currency conversions that might occur. What we landed up doing is depositing a Bank of America check for the remaining amount to Scotiabank's USD account. The amount is kept on hold for around 30 days for amounts over 10K USD. We didn't need the amount immediately and so we were good. We didn't lose money and so it was worth it!

Note that you can also transfer your investments like stocks and ETFs from your US financial investment firm to a Canadian investment firm. More in an another post. Hope that knowing this eases your fears about transferring assets from USA to Canada.

Disclaimer - We are only stating our experience and recommending based on the research we did. We are not financial advisors and are not marketing for any financial firm.

Canadian Banking basics

Financial security is important in today’s day and age! If you are just getting started or even new in the country then this blog is just for you. Step one is to create your bank account. This blog is specifically for Canadian residents; although, the concepts could apply to most countries. Like with everything else, there are pros and cons with both. 

What currencies are supported?

Most Canadian banks support the Canadian dollar (CAD) account and US Dollar (USD) account. So, if you have USD then you can deposit it in the USD currency account. If you have a USD currency bank account in Canada then you need to pay taxes for that account only in Canada. USD account is very useful in the following situations -

• If you are moving from the US and don't want to maintain a US bank account. You could transfer all your money in your USD bank account in Canada. 
• You can trade on US stock exchanges like NYSE, ARCA etc. with USD currency. Having a USD currency account can be handy.
• You get your paycheck in USD.
• If you have company offered stocks (like Employee Stock Purchase Plans or Employee Stock Options etc.) held at a US brokerage firm like Fidelity Investments then having a USD account in Canada  is handy. If you decide to sell the stocks then the proceeds can be moved to your USD bank account in Canada.

What are traditional banks?

Traditional banks are those that have been around for decades. Most of them date back to the pre-internet era. In Canada, Scotiabank, BMO (Bank of Montreal), CIBC (Canadian Imperial Bank of Commerce), TD (Toronto-Dominion Bank) and RBC (Royal Bank of Canada) are the oldest banks. Here are some of their characteristics

1. If you are new in the country then you will not have a SIN yet. You might not be able to activate your account online and will have to visit the retail branch.
2. Very useful if you have immigrated recently - 
• Staff and tellers can advise you. Especially international transfers can be complex.
• You could deposit an international check too. If the check belongs to a bank account that has non-USD or non-CAD currency then you might have to make multiple trips to the bank.
3. Typically there is a daily minimum balance requirement and so you have to maintain that minimum balance daily! For Scotiabank, it was 3000 CAD for the Canadian dollar account and 200 USD for our US Dollar account. 
4. Typically these banks don't have a great online experience. We had to call in a few times because the online experience was not so good. 
5. Something to note - Typically these banks have too many competing offers (eg: 300 CAD for account opening) and it is easy to get carried away. So decide carefully.

What are digital banks?

Digital banks are those that offer most of their services online and typically have very few retail branches. Tangerine and WealthSimple are good banks that offer great digital experience. Here are some of their characteristics -

1. You can open the account online in a few easy steps.
2. There are no minimum balance requirements.
3. You get awarded for referrals.
4. Online experience on desktop and mobile is much better. 
• Service wise - you have chat, phone and email. 
• Transfers within Canadian banks and mobile check deposit are easy.
5. Not all these banks don't support international online transfers.  
• It might not be easy to get international transfers if you have to those by phone or chat.

What do you need to open a bank account?

Typically these are the things you need to open a bank account in Canada -

1. SIN - Social Insurance Number 
2. If you are not a citizen then you need your CoPR or work permit document as proof of legal presence
3. You need to provide proof of income like your employment joining letter.
• If you don't have a job yet, then check with your bank about what they accept.

Our experience

Before landing in Canada, we did a lot of online research and consulted with a few friends who had accounts in traditional banks. So we chose Scotiabank initially. We were moving from US and so the USD account in Scotiabank was a good decision. We opened it as a joint USD account so that we didn't have to maintain double the minimum balance. The teller and advisor helped us transfer the USD funds from our bank in the US to the Scotiabank USD account in Canada. Now, we also opened individual CAD accounts. That was not a good idea because for initial 3-4 months, we were maintaining the minimum balance of 6000 CAD as a family. We then found Tangerine and opened CAD accounts there so that we didn't have to maintain such a big minimum balance as a family. We were used to having a great online experience in the US and Tangerine was a good choice.

Our recommendation 

1. Open the CAD account in a digital bank if you are used to doing things online. Tangerine or WealthSimple are good choices. Tangerine was acquired by Scotiabank.
2. Open the USD account in a digital bank unless you have international transfers from USA for USD currencies. This is great especially if you just want to trade on US stock exchanges
3. Open the USD account in a traditional bank that supports international transfer from USA. If you want to transact with banks or financial institutions in the US then choose a traditional bank. More on international transfers in a later post!

Think long term while choosing a bank. If you are comfortable with online customer service and do your banking online, then digital banks are the way to go. If you feel more comfortable with face-to-face consultations in retail branches then traditional banking might be for you. 

Disclaimer - We are only stating our experience and recommending based on the research we did. We are not financial advisors and are not marketing for any financial firm.