Any Canadian who’s traveled to (or ordered something from) the US knows about converting CAD to USD. It’s never fun to watch every dollar of your hard-earned money suddenly turn to $0.75 (or less!), and with additional foreign exchange fees, it can really add up.
And exchange rates aren’t going anywhere. The cost of one US dollar has remained above $1.25 CAD since 2018. At the time of writing (mid-2023), $1 USD costs $1.34 CAD.
The bright side is that anyone already holding USD or looking to purchase CAD with USD has it made…but what if you’ve only got Canadian dollars and you need to make a major purchase south of the border?
Well, we can’t fix the CAD to USD exchange rate…but we can make the conversion hurt as little as possible! In this post, we’ll explore ways to convert your Canadian dollars to American with minimal fees or additional costs.
1. Use a Credit Card With No Fx Fees
If you’re looking to shop in the US, a good bet for CAD to USD conversion is using a simple credit card with no foreign exchange fees. It may seem like a no-brainer, but a card like the Scotia Passport Visa Infinite will let you shop in the US and skip the 2.5% fx fee that big banks and credit card companies usually charge.
Obviously, if you’re planning a real estate purchase or major US stock investment, this solution won’t be for you. But for everyday minor currency conversions, it does the trick.
The Scotia Passport Visa Infinite is on our list of the Best Travel Credit Cards in Canada as the best no fx credit card. You can find some alternatives in our round-up of the Top Premium Credit Cards With No Fx Fees.
2. Use a Low Cost Foreign Currency Account
Canadian bank accounts that hold USD are common (you can see our list of The Best USD Accounts in Canada for details), but as with any bank account, fees can add up if you’re not careful.
A good USD bank account allows you to deposit Canadian dollars and automatically converts them at a decent rate with minimal extra fees. Our favourite choice for a Canadian USD account is the US Dollar Account from EQ Bank, which has no monthly fees and charges a low markup on conversions.
You can also try the Wise Account (formerly Transferwise), which allows you to save and spend money in 50+ currencies around the globe with minimal extra cost. Wise offers a debit card for global spending (free withdrawals are limited, but the convenience is undeniable!).
3. Use a Currency Broker or Money Transfer Company
Back in 2014 when we first published an article on the best way to convert CAD to USD, there weren’t nearly as many trustworthy online international money transfer services.
Luckily, over the years a few more options have proven themselves to be trusted options to transfer transactions quickly and easily. They are known for their bespoke service and also offer a range of non-speculative hedges, so they might be worth a shot.
How does it work?
With big Currency Brokers or money transfer companies, it works like this:
- You transfer CAD to their bank account (a segregated account held by a major Canadian bank).
- They exchange it (in our case exchange CAD for USD), and transfer it back to you domestically in the currency you desire to your own U.S denominated bank account (or – if this is a payment, to the desired recipient anywhere in the world).
Just like that, you’ve made your exchange.
Major brokers like OFX (formally Canadian Forex, in Canada), Currencies Direct, Moneycorp, and XE (merged with HiFX), to name a few, will have Canadian bank accounts and access to approximately 120 currencies on average.
How much will it cost?
Spreads of 0.5%-1% for a large CAD to USD transfer or conversion were pretty much the industry’s average circa 2014, but have been trending downward since then.
Companies like Worldfirst commit to a certain margin (Worldfirst charges up to 0.75%), while others like Currencies Direct, KnightsbridgeFX, or Moneycorp don’t necessarily commit to a certain margin.
However, if you are transferring tens of thousands CAD or more, and if you shop around, you’re likely to be able to find a price that beats companies like WorldFirst. The lowest possible margin you can get on a very large transfer or as a corporate client is likely to be around 0.25%.
Are money transfer services trustworthy?
Money transfer services have become widely popular. Just look at KnightsbridgeFX, which has helped over 100,000 businesses move over $14 billion dollars since its launch in 2014 and has been recognized as one of North America’s fastest growing companies.
These days, you have a lot more companies who move billions annually and adhere to very strict regulations. Companies like Currencies Direct are monitored by the British FCA, as well as by FinCEN and FinTRAC. These companies are regulated, legit, and insured. For more information, check out some additional reviews of the best international money transfer companies.
4. Norbert’s Gambit
Norbert’s Gambit isn’t for novices, but if you’re looking to convert large amounts of cash or invest in US markets, it can help you avoid foreign exchange mark-ups altogether.
We have a whole article outlining how to use Norbert’s Gambit, but in general terms, you use CAD to purchase inter-listed stock (stock listed on both a US and Canadian exchange) and then immediately convert the same stock in USD and sell it. Using inter-listed stock locks in your exchange rate and keeps you from losing money if the Canadian dollar drops in value between transactions.
Norbert’s Gambit can work regardless of whether you’re starting with USD or CAD. Here’s a specific post about using Nortbert’s Gambit with Horizons DLR/DLR.U, our top recommended ETF for converting CAD to USD. We recommend using Qtrade, our pick for Canada’s best discount online broker.
If you’re an experienced investor, or if you’re feeling like getting maximum bang for your buck (either US or Canadian) and don’t mind trying something new, Norbert’s Gambit is the best value for your money.
Summary of The Best Ways To Convert CAD to USD
From credit cards with no fx fees to cross-border stock trades, Canadians have several ways to convert their cash to USD while keeping as much of their money as they can. The best method for you will vary depending on what your goals are.
If you’re simply looking to do some cross-border shopping, consider a credit card or foreign currency account like EQ Bank’s USD Account.
If you need to send money to someone across the border, a money transfer company could be the way to go (remember to shop around and compare fees before you hit “Send”).
And if you’re planning to make a major purchase in the States, Norbert’s Gambit can save you hundreds or even thousands of dollars, especially if you use a discount online brokerage like Qtrade or Questtrade.
Gauge your needs and your own comfort level, and then pick the solution that’s best for you. If you pick your method right, you’ll never have to pay the typical Big Bank 2.5% conversion fee again!
Tell us your thoughts!
For those of you who regularly exchange money from USD to CAD, or convert CAD to USD, what is your strategy to reduce fees? What do you think is the absolute best way to convert CAD and USD?
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