Part 2: Saving money on da fees!!
There will always be fees. But if they really bother you, there are ways you can save a bit of money.
- Get the best rate
- Unavoidable fees VS avoidable fees
- Using the right credit card
- Setting up a float
Like always, it’s up to you to decide whether it’s worth the time and the effort to save a few bucks. But for those of you who travel and work in the states a lot… it might be worth it to investigate.
Getting the best rate:
It’s basic advice, but different banks and organizations have different rates. I spent 10 minutes hopping to a few banks and places that deliver cash to your door and definitely found some differences:
- Travelex – buying 1000 US dollars = cost 1515.38 CAD
- TD Online – buying 1000 US dollars = cost 1464.40 CAD
- RBC Online – buying 1000 US dollars = cost 1472.20 CAD
These rates change all the time (and these prices don’t include delivery fees, they’re just the original quoted prices), but it might be worth it to look around for a few minutes before grabbing some cash.
I think it’s interesting to note that a few travel sites talked about the advantage of changing cash in the destination country instead of in Canada (they weren’t writing specifically about the US) so I thought I’d try a US bank.
- Bank of America – buying 1000 US dollars – cost 1520.22 CAD
*These are not definitive or foolproof experiments… just information. Do your own research.
Unavoidable fees VS avoidable fees:
It seems to me there’s a basic rule of money:
If you think ahead you can save money. People love to profit on your forgetfulness.
You can’t avoid a bank fee (at least not completely), what you can do is avoid paying the higher fees that you’ll find in the airport at those little currency booths.
This article from investopedia simplifies it nicely:
- Worst rates: the airport
- Bad rates: those currency exchange stores you see in touristy areas
- Good rates (or at least you best options): ATMs and local banks.
I will throw out a word of caution about ATMs. They can really hose you with fees. They’re all different, so it’s tough to break down, but it’s good to understand. Sometimes you can end up getting charged by multiple banks and service providers… which is not super fun.
I bank with TD, and it’s really nice when I go to the states (especially New York) because they have American branches everywhere. The American TD and the Canadian TD are NOT the same bank, BUT I can use their ATMs without a fee. Which is really nice.
Using the right credit card:
I have a great travel card. I collect points. It’s got good travel insurance, and some other tasty travel perks.
It also has a nice little 2.5% foreign transaction fee. This is something I kind of knew… but hadn’t given much thought until the dollar got absolutely terrible and I started writing this article.
If you travel a lot, you might be interested in getting a NO FOREIGN TRANSACTION FEE credit card, of which there are shockingly few.
Personal finance blogger and travel guru Barry Choi breaks them down HERE:
- Amazon Rewards Visa Card
- Marriott Premier Rewards Visa
- Rogers Platinum Mastercard
It’s interesting to me that there are so few credit cards with no foreign fees, so let me know if you know of some that aren’t on this list.
The only one of the three without an annual fee is the Amazon card, and they all have different perks which may or may not sound tasty to you.
Just remember, you might be hooked on your card that gives you 2% cash back, or a couple of travel points per dollar spent, but if you’ve got a foreign transaction fee you could be losing all of that when you travel anyways.
$2 cash back MINUS 2.5% transaction fee = you’re losing money… not gaining it. #thinkaboutit
Setting up a US dollar float:
This might be my favourite method, and it’s especially useful for people who work in the states quite a bit.
Don’t spend your Canadian money in the states. Keep US dollars available for when you go down.
If you believe some of the crazy doomsday predictions for the Canadian dollar in 2016, things are not going to go well. They’re talking about it dipping to a value lower than 60 cents to the US dollar.
So why not set yourself up now, to avoid that pain?
Most banks have US dollar accounts that you can open. They allow you to keep some of your money in US dollars. That means that if you changed a few hundred bucks over now, and the dollar goes down another 10 cents… it matters less. On your next trip to the states, you’re spending US dollars.
This works especially well for people who are working in the US and getting paid in US dollars. It’s really tempting right now to bring all your money back to Canada and take advantage of the sweet side of this crazy dollar… but it might be a good idea to keep some of it in the states.
The idea of setting a ‘float’ is having an account with US money in it that you can use instead of being a slave to the variable dollar.
When you’re a freelancer, any way that you can cut out some variability is sanity in your pocket.
*It’s important to note that exchange rates are really variable and impossible to predict. No matter what the ‘experts’ say today, it may change tomorrow. A float can be a useful tool, but there is always risk when you’re transferring between currencies. You CAN lose money.