Tag Archives: commissions

What’s the Most Expensive Way to Add US Dollars to my BMO InvestorLine USD RRSP Account?

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Once you have a US dollar sub-account within your RRSP or other investment account at BMO InvestorLine, the next question is how do you fund it. There are two obvious methods: you can exchange Canadian dollars into US dollars; or you can buy an inter-listed stock on the Canadian exchange and sell it on the American exchange. (There are also a few less obvious methods.) Which is the most expensive (not the cheapest) way to add USD to your InvestorLine account?

How to Check the Foreign Exchange Rate at InvestorLine

You can check the foreign exchange rate BMO is offering very easily at InvestorLine. (It’s not so easy at Investor’s Edge: there you have to phone and ask.)

  1. Sign in to your InvestorLine account.
  2. From the Trading tab, select Foreign exchange.
  3. If  you want to see how many US dollars you can buy for 1 Canadian dollar,
    in the Action: area select the radio button beside Sell
    In the Amount $: field, type: 1
    In the Currency: area select the radio button beside CAD
    Click on the Calculate button
  4. The system will respond with
    an Approximate Rate (in this example: 1.055)
    and
    a Total: (in this example: $0.95 USD)
  5. If you then select the radio button for USD in the Currency: field
    change the Amount $: to 0.95
    and click the Recalculate button
  6. The system will respond with
    1.023
    and
    0.97 CAD.

Beware of the Foreign Exchange Fee Built Into the Foreign Exchange Rate

“Wait a minute!” you exclaim. “How come if I change 1 CAD to US I get 0.95 USD but if I change that straight back to CAD I only get 97 cents!”

That’s because there is a built-in foreign exchange fee on top of the actual exchange rate. You get fewer USD than you’d expect for each CAD you spend, and you get fewer CAD for each USD you spend. The bank gets a bit of the money each time you change it.

You can see on this exchange and exchange back, you have paid the bank 3 cents on 1 Canadian dollar, or about 3% in fees.

It may not seem fair, but it’s true.

Testing it with a more practical amount of 1000 CAD:
1000 CAD gets $947.87 USD
and $947.87 USD gets $969.67 CAD

That’s a loss of 30.33 or 3.033%. Ouch.

You can see why investors started looking for a way around these fees!

So How Bad Is It Really to Pay This Foreign Exchange Fee to InvestorLine

Some readers may be thinking, ya ya I have to pay a fee. So what? How bad is it, really?
Well, I guess it depends on how much money you are converting whether it FEELS bad (The loss is actually the same as a percentage.)

If you convert You lose
$1 $0.03
$1 000 $30.33
$10 000 $303.30
$100 000 $3 033.00 $2 181 **

** InvestorLine’s automated exchange rate improves for amounts in this range. When I actually tested the available exchange online, it cost only $2181, rather than the 3033 I had estimated based on the rates offered at 10,000 and lower. The screen message also said they would phone me to discuss the rates: in other words, they will reduce the commission if it will keep you investing with them. Thanks to Michael James on Money for pointing out this error!

Or to put it another way, would you pay a 3.033% MER on a mutual fund that just replicates the index? Then why would you pay this fee for even less service?

Using the Automatic Foreign Exchange Offering at InvestorLine is the Most Expensive Way to Convert Cash

In conclusion, the most expensive way you can convert cash in an InvestorLine account is to use the automated foreign exchange feature under the Trading menu.

Since I prefer to save money, not spend it needlessly, the next article will discuss some other methods to exchange currencies that cost less than this.

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Have you ever got caught by a horrible foreign exchange fee? Did you buy something on a credit card and get dinged with an extra 2.5-5%? Did you buy something online only to find that they billed you in USD at some terrible exchange? Please share your experiences with a comment.

How to Get the $9.95 Trades on CIBC Investor’s Edge Once You Have $50,000

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The regular trading commission at CIBC Investor’s Edge (in October 2013) is $28.95 per trade. If you trade excessively, er, frequently, you can qualify for a lower cost. Most people, however, won’t qualify until they have over $50,000 in their account/s. The $50,000 can be combined across various accounts held by people living in the same household. For example, it could be the total held in a husband’s RRSP and his wife’s TFSA. Once you reach the magic $50,000 at Investor’s Edge what do you do to start getting the cheaper $9.95 trades?
UPDATE: Investor’s Edge now offers $6.95 trades to anyone regardless of their account balance. Be sure to have the minimum account size, though, to avoid any annual fees.

Sorry This Can’t Be Handled Online or Automatically

You’d think that with huge computer programs that can trade stocks down to fractions of a cent in less than a 60 th of a second that they could just automatically reduce the trading commission when your account balance totals over $50,000.

In reality, though, these computer programs were written before they introduced the idea of reduced fees based on the amount of money in the account/s. It’s only through aggressive competition (among banks! imagine!) that these types of reduced fees have appeared. In fact the reduced price for investors with $50,000 is only a few years old. The computer programs have not kept up.

So getting $9.95 trades requires a manual change to the program. And that requires phoning CIBC Investor’s Edge to request the adjustment.

Contacting Investor’s Edge to Reduce Your Commissions

In October 2013, the number to call is 1 800 567 3343 between 8 and 8 ET.

What to Expect When You Call

I had hoped the call would be a simple one minute “Hello. Ok. Done.” Foolish me. Phoning also gives the customer service representative a captive audience for further questions.

First they explained how with $100,000 in accounts with Investor’s Edge and other CIBC divisions, we could qualify for $6.95 trades. Next was a pitch to have my spouse move investments to Investor’s Edge. And a plug to move our mortgage. (We don’t even have a mortgage which is always extremely fun to say!)

However, within 3 minutes, the phone call was finished and the change had been made. Or had it?

Confirming the Trades Now Cost Only $9.95

Not that I don’t trust people but I did check as soon as trading started the next morning what the system said my trading fee would be. (I had phoned my request in at 7:55 ET) To my pleased surprise, it correctly states I am now charged $9.95 not $28.95. Good one Investor’s Edge!

What If I Already Executed a Trade After I Reached the $50,000 Level But Without Phoning

Many people think the $9.95 price will kick in automatically. So they put in an order to buy or sell without really looking. They realize later that they’ve been charged the full $28.95.
If you are one of these unfortunates, just phone Investor’s Edge. They should be willing to credit you back the difference in cost. ($19.) The number is the same: 1 800 567 3343 between 8 and 8 ET.

Enjoy your savings!

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Do you pay $28.95 or $9.95 for your trades at Investor’s Edge? Or are you down to $6.95 because you have more invested or have a large mortgage at CIBC? Please share your experiences with a comment.