With the Canadian dollar hovering around $0.70 U.S., those who live along the border or shop a lot in the U.S. are likely taking a financial hit. With the cost of exchanging money back and force between currencies likely to put a damper on your spending power, perhaps it’s time to consider getting a U.S. account?
There are a lot of benefits to be had from different types of U.S. accounts. The biggest benefit is the flexibility to exchange money when the rates are good and to hold onto those funds for when you need them. Having U.S. accounts generally decreases your conversion fees and allow you greater flexibility when spending money in the U.S.
They also allow you to potentially convert money at a third party money exchange which often offers better rates than banks. Converting larger amounts of money at a time could also offer you some savings at these third party money exchange companies.
But there are different types of U.S. accounts and each is helpful in different ways. One or more might be right for you and could potentially save you a significant amount of money over the long term. Here are four types of accounts you should consider opening:
1: A U.S. Dollar Checking or Savings Account at a Canadian Bank
You can easily set up a U.S. chequing or savings account up at whatever Canadian bank you deal with. The benefits of keeping a U.S. chequing account are that you can keep U.S. funds available for you to use when you need them. Depending on how much money you keep in your account and which bank you open the account with, you might even be able to get the monthly account fee waived.
By doing so, you will not have to worry about converting funds at the last minute and being at the whim of whatever that day’s conversion rate happens to be. U.S. bank accounts also makes it easier to have and pay off a U.S. credit card. If you have a U.S. card and do a lot of cross-border or online shopping you likely got that card in order to avoid exchange fees. But if you use Canadian dollars in order to pay off your U.S. card your savings are often lost since you’re charged for conversion when you make a payment.
If you receive payments in American cheques, this account also allows you to deposit the money directly into the account without having to convert it to Canadian Dollars. Just know that if the checks are coming from accounts in the U.S., most banks will place a two week to month-long hold on the funds before they release them to you to use since the funds are coming from a different country.
2: A U.S. Dollar Credit Card Account
If you don’t have a U.S. dollar credit card but make a lot of purchases in U.S. dollars, you should definitely get one. A U.S. dollar credit card will save you a significant amount of money since credit card companies charge a mark-up on their conversions. Most banks offer U.S. dollar credit cards although you might have to pay an annual fee.
3: A U.S. Dollar Checking or Savings Account in the U.S.
Another type of account that you might be interested in opening is an actual U.S. bank account. This isn’t just a bank account holding U.S. funds in a Canadian bank but it’s a bank account in U.S. funds that is held in the U.S. You can go across the border and open one at a U.S. bank, but the easiest way to get one is to go to RBC or TD, which are the only Canadian banks which offer U.S. accounts to their customers.
The benefits of these types of accounts are that if you own property in the U.S. you can use it to facilitate bill payments and taxes on your U.S. property. Also, if you receive U.S. funds via Paypal for any reason, you can transfer them to your account without having to convert them. If you transfer them to any Canadian account, Paypal automatically converts the funds to Canadian dollars.
4: A U.S. Dollar Investment Account
The final type of U.S. account that you might want to have is a U.S. dollar investment account. If you have U.S. securities in your registered or unregistered accounts, you’re better off holding them in a U.S. account than in a Canadian dollar account.
You can get a U.S. dollar TFSA, a U.S. dollar RRSP, and a U.S. dollar unregistered investment account. This will make sure that when you sell your U.S. securities they aren’t converted immediately or put into a U.S. money market fund (a tactic that some brokerages use to save you money on currency conversion). A much simpler and smarter option is just to have your U.S. investments in U.S. accounts since you’ll avoid all fees and conversions.