Comparing Canadian to US Dollar Cash Exchange Rate Options

A reader was checking recently about how to use Tangerine to buy USD and then transfer them to another bank to withdraw the US cash. It made me realize it’s been a while since I compared exchange rates offered by various banks. Now that Scotiabank owns Tangerine (formerly ING Direct) does it still offer a reasonable US dollar exchange rate or not? Here’s a comparison of some US dollar exchange rates.

Where Should I Buy My US Dollars?

Note: Exchange rates change frequently. Always check with your bank before you make a big exchange in case a better deal is out there. Also, for those with non-registered brokerage accounts and a large amount of money to exchange, consider using Norbert’s Gambit.

Here, in order of “getting the most US dollars for your Canadian dollars” are the banks and credit unions I compared.

All of these rates were posted online rates on December 26 2014. Rates change frequently. These rates are how many Canadian dollars and cents you would have to pay to buy ONE US dollar.

  1. Tangerine buy USD at 1.185
    http://www.tangerine.ca/en/rates/index.html
  2. Vancity buy USD at 1.1852
    https://www.vancity.com/Rates/ForeignExchange/
  3. National Bank buy USD at 1.1880 Includes a mysterious comment about checking the rate that your branch can offer. I’m not sure if that means it will cost more at the branch or less!
    https://www.nbc.ca/en/rates-and-analysis/interest-rates-and-returns/exchange-rates.html
  4. RBC buy USD at 1.1894
    http://www.rbcroyalbank.com/cgi-bin/travel/currency-converter.pl?tabset=table&ProspectID=FBD04E151BAD443DA6FE69802DC489DC
  5. BMO buy USD at 1.1895
    http://www.bmo.com/home/personal/banking/rates/foreign-exchange
  6. Scotiabank buy USD at 1.190500
    This appears to be for cheques not cash in which case the actual rate is worse than this.
    http://www.scotiabank.com/ca/en/0,,1118,00.html
  7. TD buy USD at 1.1930
    (No wonder my TD stock keeps going up in value!)
    http://www.tdcanadatrust.com/customer-service/todays-rates/rates.jsp

CIBC, Meridian and PC Financial seem to need you to phone in for their rates so I didn’t include them here.

So Tangerine does still seem to be offering a good rate.

Other Factors Determining the Exchange Rate

Some banks and credit unions offer a better exchange rate for non-cash exchanges. For example, if you are “cashing” a cheque payable in USD into CAD they may offer a better exchange rate because they never have to actually handle US paper dollar bills.

The more money you have to exchange the better rate you can get. Tell them you need to convert $1 million and you will get a much better rate offered than if you have to convert $100.

If a currency is unusual and little used in Canada, the exchange rate offered will usually be quite poor. Getting or getting rid of the paper currency will be a nuisance for the bank and they will charge more for their hassle.

If you have a large amount of money to convert and have a non-registered brokerage account you may want to use a method of buying and selling a mutual fund or stock that is listed on both a Canadian and an American stock exchange to convert your cash. This procedure is commonly called Norbert’s Gambit after the person who first wrote about it as a cost-saving tool.

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How do you convert your Canadian dollars to US dollars? Do you use a bank because it’s quick and convenient? or a forex service? or a brokerage? Please share your technique with a comment.

How to Choose a Standard Bank Tax Free Savings Account, TFSA, with Minimal or No Fees

When Tax Free Savings Accounts, or TFSAs, were first created in 2009 most banks offered the accounts with no fees to entice customers. It also was practical: Who would pay a $100/year fee for an account that could be opened with, at most, $5000? But in 2010, 2011, and 2012 another $5000 contribution was permitted, and in 2013 and 2014 a $5500 contribution was allowed. That means anyone who was 18 in 2009, and who lived in Canada in 2009 and each year after that, can now have up to $ 31 000 $25500 contributed to a TFSA, not counting any re-contributions of withdrawals. Unfortunately this also means that some banks are charging fees for TFSAs. This is a review of some options and what, if anything, they cost.

As with RRSPs, there are roughly two types of Tax Free Savings Accounts: those that can hold almost any type of investment, called self-directed TFSA brokerage accounts, and those that can only hold a very limited number of investment choices which I will call standard Bank TFSA accounts.

Fees for Standard Bank TFSAs that Can Only Hold Cash, GICs, Term Deposits and Some Mutual Funds

For many people, a tax free savings account is the first place they start saving for the long-term. It may hold their entire emergency fund. It may hold their savings for education, a first home, a wedding or retirement. They may have very little money saved or invested outside of the TFSA. These investors often start with a simple bank TFSA account.

Within the bank TFSA account, they can hold cash in a savings account that pays interest. They can also usually buy cashable term deposits, non-cashable guaranteed investment certificates (GICs), and mutual funds that are offered by that particular institution.

For example, if a client sets up a TFSA account at Tangerine (formerly ING Direct), they can use a daily interest savings account, buy a cashable GIC, or invest in the “Streetwise” mutual funds managed and sold by Tangerine ING Direct. They cannot buy mutual funds offered by other institutions, nor can they buy ETFs.

As shown in the table following, many of these bank TFSAs have low or no fees for most situations. That makes them appealing to beginning investors. Be careful, though, about fees for transferring and closing these TFSAs. You may want to move your TFSA in the future and those fees can sting.

If you know you ultimately want to move to a self-directed brokerage TFSA in a few years, to avoid transfer and closing fees either choose a no-fee bank TFSA (such as the one from Tangerine, formerly called ING Direct) or set up your bank TFSA with the bank affiliated with the brokerage you want to use in the future. For example, BMO does not usually charge a closing fee if a TFSA is moved from BMO to BMO InvestorLine.

BMO CIBC Tangerine
ING Direct
National Bank
Set-up Fee  0  0  0  0
Transfer Fee  0 $50
 $100  0 $45
 $50
Closing Fee $50 + tax  $100  0 / $45  $50
Minimum Balance  $50  $25  0  0
PC Financial Royal ScotiaBank TD
Set-up Fee  0  0  0  0
Transfer Fee  $50  $50  $50  0** $75 plus tax
Closing Fee  0*/ $50  $50  $50  0**$75 plus tax
Minimum Balance  0  0  0  0

* The PC Financial/Tangerine situation is a bit mixed. It costs nothing to withdraw your entire cash balance from a savings account if you transfer it to your PC Financial/Tangerine chequing account. However it apparently costs $40 to close a mutual fund PC Financial TFSA. It should not have a fee to sell your Tangerine Mutual Funds so long as you have the cash move into your Tangerine cash TFSA savings account. You can then withdraw the cash from your Tangerine TFSA savings account for no fee–but you can’t transfer it out for free. PC Financial and Tangerine do not automatically close an account just because you withdraw all the funds, which is why it can be $0 to close but $50 to transfer.

** I was very surprised to find that TD is not charging a fee to transfer out or close a TFSA. This information was accurate on December 4, 2012. I would strongly recommend checking with TD to find out if this has changed before opening a new TFSA at TD,  just in case. UPDATE: As of early 2016, TD  now charges a fee to transfer out of a TFSA or close a TFSA.

February 2014 Update Sources

  • BMO: http://www.bmo.com/home/popups/personal/investments/tsfa-faq and
  • https://www.bmo.com/home/personal/banking/rates/tax-free-savings
  • CIBC: https://www.cibc.com/ca/investing/tfsa/tax-advantage-savings-acct.html
  • National Bank: http://www.nbc.ca/bnc/files/bncpdf/en/2/tarification_en.pdf#xml=http://www.nbc.ca/bnc/cda/searchEngine/0,2648,divId-2_langId-1_navCode-1000,00.htmlxml.txt?query=fees&query2=fees+fees+FEES+fees&query3=fees&pr=bnc_en&order=r&cq=&id=52f9af2e2
  • President’s Choice Financial: http://www.banking.pcfinancial.ca/mkt/investments/taxfreeinterestplussavingsaccount-en.html?region=ON&language=en&signinop=OB and click on the Fee link under the Legal section.
  • RBC Royal: http://www.rbcroyalbank.com/tfsa/tfsa-basics.html I can’t find the exact $ amount for the transfer out fee online, but as recently as 2013 it was $50.
  • ScotiaBank: I can’t find a specific number for the transfer out fee in February 2014. The $50 cost was valid in 2013.
  • TD: http://www.td.com/to-our-customers/tdhelps/#psce|cid=871|lid=1|tid=001|vid=b0f1321fe
  • TD fees on July 2016 (not for TD Direct Investing, just regular bank branch TFSAs)
    https://www.tdcanadatrust.com/document/PDF/accounts/513796-20160428.pdf

By Transfer Fee I mean the fee to transfer the money to a different bank or financial institution. Usually to transfer money back into your regular chequing or savings account at the same institution is free.

Unfortunately fees and costs may be changed at almost any time. Before actually opening an account, contact the financial institution to confirm all costs. I’d hate to cause you a costly mistake if the bank raises its fees just after I issue this report!

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Do you have TFSA? Did it surprise you with any unexpected fees or costs to use or maintain? Please share your experiences with a comment.