Is there a way to find out which bank(s) provide the best terms; e.g. cash transfer and foreign exchange fees, to Canadian bank accounts (and USD conversion to CAD)? Just thought I’d ask before doing my own research, in case doper(s) already know.
The only thing I know on the subject is that transfer between a TD account in the US and a US dollar account in a Canadian TD account is free. But between ordinary TD accounts in each country they extract the same pound of flesh as everyone else on the exchange. It doesn’t cost them a cent, but they charge royally.
How do I know it costs them nothing? TL;DR, but I can tell you a story. In Oct. 2018, I was buying a condo, although it had a tenant who had a lease until the following June 30. So I could not sell my house and move until then. So how to pay for the condo. I had enough in my brokerage to pay for it, but it would have meant generating a significant capital gains tax and my financial advisor advised against it. I guess I could have applied for a mortgage, but that would have been expensive and a hassle I didn’t need. My son in the US was perfectly willing to lend me the money, but I expected I would have to pay exchange twice, once to get the money, once to pay it back. Oh no, my financial advisor explained. We can exchange the money with no fee whatever at the current bank to bank rate. And that is what we did. My son wired the money (there was a small fee for that) to my US bank account here. I got a cashier’s cheque (no fee) for that amount in USD, took it to my financial advisor who changed it to CAD and gave me their cheque for the amount which I handed to the notary who supervised the sale of the condo (notaries deal with real estate transactions here). When I eventually sold the house, I took the cheque from the selling notary to the financial advisor who took the amount of the loan (with interest), changed it for free to USD and then I deposited it in my USD account and wired the money to my son.
But the notion of doing forex transactions “for free” is a fiction. It’s the rate that matters. More specifically - the spread relative to the wholesale interbank rate. For example, forex desks at airports promote this “commission free” bullshit, but use an exchange rate that’s 7% higher or lower than the wholesale rate.
You can figure this out either by getting a live quote and comparing it to the live interbank rate at exactly the same time, that you can find here:
Or you can ask for a two-way price - ask them to quote you both buy and sell prices, and look at the percentage difference.
What the bank is really charging you on a “free” transaction is the difference between the rate you get and the wholesale rate.
Royal Bank of Canada started a special account last tear that simplified cross-border transactions, but I haven’t checked the details.
Thanks everyone. I think TD would make the most sense. And yes, I completely agree on the exchange rate spread, especially for consumers. My kids live in Canada and I will be funding their college tuitions/fees, etc. from the US. I spent the last decade getting reamed on fees and f/x on my support payments, as I gave my ex-wife a check book from my US account; losing at least $50 a month, so trying to come up with a better way for the college years.
For substantial transfers, I use OFX for GBP/USD. Their rates are negotiable, better for larger amounts, but always far better than the banks. You wire money to them in one country, they wire it immediately to your account in the other country.
But for USD to CAD, I wouldn’t be surprised if someone like TD has made a business decision to not rip customers off on the forex, to try to get the banking business. But the only way to find out is to ask them for a live quote and compare it to the wholesale rate at the time, you just can’t trust banks on forex at all, it’s a big earner for them because most customers just don’t understand how much they are being charged.
Banks now regard Forex as a cash cow. In the 70s I could walk into any branch of a Canadian bank and buy or sell Yen or DM at a spread of less than 1%, draughts or even cash.