# Preferred rate for US exchange



## Cal (Jun 17, 2009)

I was in the bank (TD) the other day and they mentioned that b/c of the chquing account that I have I get a preferred rate when I exchange for US currency.

They also told me that I can't do the transfer/exchange online, I have to call in to get the better rate.

I had been thinking of getting some JNJ in my RRSP account...looks like I procrastinated a little too long on that one. Shoudl have bought before this past week.

Makes me think of the ALLY commercial.....I may not be a 'more new' customer as shown in their ads, but if I call in to transfer money into a US account, I will get the better rate over those who do not have my chequing account.

The rep would/could not tell me the exact exchange rates. 

Whats the deal w that?


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## Karen (Jul 24, 2010)

Would TD's preferred rate apply to converting from US to Ddn dollars as well as the other way around? I ask because I receive a monthly US Social Security payment which is deposited automatically into my US dollar account at Scotiabank. If I need some of that for liiving expenses that month, I'm losing more and more of it (of course) as the Cdn. dollars continues to rise. I always do the transfer on line, but I asked at the bank if I was getting the same exchange rate as if I did it in the branch, and they said it made no difference. I'm curious if TD would give me a preferred rate in the same circumstances. I wouldn't change banks for that reason, but it might give me some bargaining room with Scotiabank.


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## slacker (Mar 8, 2010)

@Karen: Do you know what rate TD is charging beyond the market exchange rate? In TD Waterhouse, they charge about 1.5% more than the market rate.


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## Karen (Jul 24, 2010)

I don't know, Slacker - My US dollar account is at Scotiabank. I was just interested in Cal's suggestion that TD gives a discounted rate to good clients to see if Scotiabank has a similar plan. I don't even know Scotiabank's rate - I just go online and make the transfer from my US dollar account to my chequing account. I should be ashamed of myself for that, and I will ask next time I'm at my branch.


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## Square Root (Jan 30, 2010)

Bought some US yesterday from TD. Rate ws 96.60. Sounded pretty good to me. This is supposed to be the preferred rate but hard to tell.


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## slacker (Mar 8, 2010)

@Karen: I don't think "shame" enters into discussion here. 

In any case, "preferred" or "discounted" sounds like a marketing name for "we're going to gouge you in your tender areas slightly less viciously"....

Most retail over the bank counter exchange rate is about 1.5% over the market rate. I wouldn't like it if the banks take 1.5% of my paycheque every month. 

There is a reason why the banks don't post the actual spread (the profit they charge over the market rate), they want to make it difficult for unmotivated customers to price compare. It's no coincidence that the bank teller is reluctant to tell you the actual exchange rate.

Assuming your cheque is $1000, and you receive it 12 times a year, at 1.5% exchange fee (beyond market rate), you're paying the bank about $180 every year on exchange alone. It probably cost them less than $1.80.

PS: sorry for the rant, forex fee is a pet peeve of mine.

PPS: http://dan.matan.ca/Canadian-Dollar-US-Dollar-Foreign-Exchange-Rates-BANK-COMPARISON#comment-1107
Looks like it's worse than I thought. Over the bank counter rates could be as bad as 2.5% to 5%. Sounds like the "preferred" rate is at best 1% to 1.5%. Stupid uncompetitive Canadian banks.


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## Karen (Jul 24, 2010)

My cheque is about $1200 US a month so it would add up over the year if I converted it every month. I am often able to leave it in the US dollar account, but some months I do have to convert it when I have extra expenses. I did move $10,000 into my chequing account just before our dollar moved up over par, so I'm glad I did that.

I'll let you know what Scotiabank tells me when I enquire about their rate.


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## Karen (Jul 24, 2010)

I just tried to phone my bank manager to ask, but I had forgotten it was Good Friday and the bank is closed. But I found this notice on the Scotiabank website:

_For fund transfers from your Canadian dollar bank account to your US dollar bank account, 200 basis points have been added to Scotiabank's posted Client Buy US dollar rate (i.e., 0.02 added to the posted Client Buy US Dollar rate). For fund transfers from your US dollar bank account to your Canadian dollar bank account, 200 basis points have been subtracted from Scotiabank's posted Client Sell US dollar rate (i.e., 0.02 subtracted from the posted Client Sell US dollar rate)._

So, it appears that the bank's cut is 2%.


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## cardhu (May 26, 2009)

Yes, Scotia charges 2% … TD’s fee hovers around 1.4%, if you have their US$ account (called the Borderless Account) ... 3 minutes ago the fee was 1.44%, but I’ve seen is as low as 1.37 ... and yes, the preferred rate applies to both buying and selling … check out TD’s Select Service account … the US$ account and a US$ Visa (among other things) are included with that account, and as long as you maintain a $5000 balance in the C$ chequing account, all monthly/annual fees are waived. 

Cal … the only preferred rate I’m aware of that is tied to a type of chequing account is the Select Service account … if that’s what you have, then yes you can buy/sell US$ online, for the same fee. 

Slacker … all tellers will gladly tell you the actual exchange rate, if you ask … how else could anyone buy US$??? … most people aren’t willing to just hand over a bundle of Cdn$$ and say “surprise me!” … but they can only tell you the rate that applies at that particular moment, because it is constantly changing … you can’t lock in an exchange rate for 90 days the way you can a mortgage rate. (with TDs online currency exchange function, you have to complete your transfer within 1 minute, or it forces you to get a new quote.)


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## Cal (Jun 17, 2009)

I think when I am in there in the next week or two, I will make the time to pin them down exactly to what the regular and current rates are.

Will keep you all updated.


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## Karen (Jul 24, 2010)

Do any of you have any idea of whether Scotiabank would be open to lowering their exchange rate for a good client if the client could provide evidence of the lower TD rate? I have about $700,000 in GICs invested there (in RRSPs, unregistered GICs, and TFSA) and they give me a very favourable bonus rate on my GICs, so I'm wondering whether they might do this as well.

I intend to ask them about this when I'm there next, but I'm curious to know whether I will have any chance of success.


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## Plugging Along (Jan 3, 2011)

I think it's worth a try. Whenever I find a better rate at another bank, I ask TD to match it, and so far they have everytime. 

There's no harm asking. Are you willing to move if they don't give you a good rate?

That's why I moved from BMO, they screwed up one too many times, so I moved to TD. BMO called me for over a year trying to get my business back. I think if you tell them you are considering moving, they will realize that it will cost them alot more if you move, than if they don't give you a better rate. If they don't realize this, then point out with them. You definately have enough assets to make it worth their wild. 

I have also found that if I'm firm and confident (but still very polite and respectful), I usually get what I want. If you leave it up to them, they are sometimes clueless.


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## Cal (Jun 17, 2009)

I just logged on to TD and the current USD exchange rate is $1 US DOLLAR costs 0.982c CDN. 

Currently our dollar is worth 104.93c compared to $1 US.

Now....I don't know the math exactly...but that is roughly a 6% exchange rate for TD to do the conversion....correct?

Perhaps they could update their website to politely ask me to bend over and grab my ankles as well.


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## Plugging Along (Jan 3, 2011)

I your math is off... they are giving you 1.0183 US on $1 cdn, which would be about a 3% spread based on the rates you just posted.

I know if you have their select account, it's about a 1.5% spread, unless you're buying over $100K


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## Karen (Jul 24, 2010)

> Are you willing to move if they don't give you a good rate?


Actually, I don't think I am, PA. I just finished moving everything from TD to Scotiabank because Scotia gives me a better bonus on my GIC interest. That's probably more valuable to me than a slightly better exchange right. But I'm going to enquire anyway, and see what they say.


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## Sampson (Apr 3, 2009)

Gambit anyone?


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## Karen (Jul 24, 2010)

Sampson, I keep seeing that term - gambit - on this forum, and I have to confess I haven't the slightest idea what it means. Can you educate me?


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## FrugalTrader (Oct 13, 2008)

Is the TD preferred rate under the Select Service account?

The last time I checked with a CIBC teller, they were charging 3.3% above spot rate.


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## slacker (Mar 8, 2010)

Karen said:


> Sampson, I keep seeing that term - gambit - on this forum, and I have to confess I haven't the slightest idea what it means. Can you educate me?


Google for "Norbert's Gambit". There had been pages of discussions on here and the financialwebring, also numerous articles on CanadianCapitalist website.

The short of it is to find a stock that is listed on both Canada and US, (say Royal Bank TSE:RY and NYSE:RY), buy 100 shares or TSE:RY with Canadian dollars, then sell 100 shares of NYSE:RY, and receive US dollars. Bam, you had converted from Canadian dollars to US dollars at the cost of 2 trades, and bid-offer spread.

There are numerous details to this technique related to which brokerage work, and whether it works with a registered or non-registered accounts. Some can be done entirely online within seconds, some require a call afterwards to do wash trade, and some you'll have to argue with the trader on the phone to convince them.

So this is not an uncomplicated technique to people who have not done this before. I once paid over $600 in forex fee to TD because I didn't know the existence of this technique. Personally, I don't mind jumping through a couple of hoops to save $600, but that's just me. I think most people are happy to pay whatever the bank charges as long as they don't have to do any math.

PS: I'll document all these details someday ....


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## Sampson (Apr 3, 2009)

Yeah, slacker has a wonderful overview of what happens.

I use RBC DI and it is easy as pie.

Buy from CAD$ account, sell on US exchange and have proceeds go to USD$ account. All the journaling (moving the shares from CAD account to USD account before selling) is automatic.

I think you can do it with Scotia, but might require a call into the brokerage to have someone help you with the journaling.


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## Cal (Jun 17, 2009)

Plugging Along said:


> I your math is off... they are giving you 1.0183 US on $1 cdn, which would be about a 3% spread based on the rates you just posted.
> 
> I know if you have their select account, it's about a 1.5% spread, unless you're buying over $100K


Thanks for the correct math. As mentioned above, apparently I do have some sort of select account, the only catch is that the bank requested to call in to get the lower rate. And by calling in to make a trade, they charge you a higher price to carry out the trade. I am sure if I put up a fuss they would waive it....but it just seems silly to not have it automatically set up through my online trading account, that also has my preferred chequing account....


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## Plugging Along (Jan 3, 2011)

It was TD the Select account with and a US Borderless account (not sure if you need both, for sure the select) for the better rate.

I have had to call in trades before, and just asked them to give me the perferred rate for the trade, and they did.


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## humble_pie (Jun 7, 2009)

sampson - it works on rbc because their mainframe based on the ADP system. Also on ADP: bmo. e.g. gambits also work on bmo's platform.

but they don't work in non-registered on scotia itrade which uses ISM. Nor on tdw which also uses ISM, for that matter.

phoning either of these 2 firms doesn't work unless you're a hi-valu client or arbitrage trader or both. Brokers do not want to do the sell side of a gambit. That manual "journal" you're talking about is not an ordinary journal at all.

the only person in this forum who routinely seems able to get td waterhouse to sell his gambits instantly is CC. This must be because of the radiant charm of his aura. Unless CC is secretly a multi-millionnaire or an arb trader.

what all brokers want is for all clients to pay the FX fees, of course. Which seem to have increased over the past year or 2, if prices mentioned on this forum are correct.


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## cardhu (May 26, 2009)

Cal said:


> roughly a 6% exchange rate for TD to do the conversion....correct?


TD’s regular fee is 2.5% … that is what they charge any anonymous Joe coming in off the street … the preferred fee, as stated upthread, hovers around 1.4%. 
Yes, you can buy/sell US$ online. You do not need to call them.


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## humble_pie (Jun 7, 2009)

currency gambits have nothing to do with buying/selling US dollars online or anywhere else.

gambits will capture the opposite currency at wholesale rates, extremely close to bank of canada rates, with no foreign exchange fees whatsoever, by arbing a canadian interlisted stock between its native toronto & its US exchange. Or vice versa, for those going in the opposite direction.

.


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## Cal (Jun 17, 2009)

Is 1.4% the best out there, or the preferred rate amongst the banks for the USD exchange?


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## larry81 (Nov 22, 2010)

I am with TD, brokerage only no bank account.

I have a non-reg account (in the name of my small business) in which i frequently convert CAD to USD for investing purpose.

I what i read in this thread is correct, i sould open a td select bank account in the company name to get the 'prefered rate' when i convert ?

I was told by the TD brokerage phone rep that the actual commission go lower the more you convert, 1.3% <=25k ... all the way down to 0.3% for >=100k.


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## Sampson (Apr 3, 2009)

humble_pie said:


> currency gambits have nothing to do with buying/selling US dollars online or anywhere else.


I really am confused by all this discussion of preferred rates. Whether the purpose is investing in USD deliniated investments, or even converting some cash to buy a car in the States,

the currency gambit is the way to go. No need for $100k or anything, and even 0.3% on $100k is still $300. Compare this to the gambit, $19.90 in commissions.

I can understand people might be anxious, but there are posts all over the internet, including this forum that have detailed, step-by-step instructions of how to do it. But maybe too many of us doing it and who knows what the banks will do. I know humble thinks they might make it easier, but I think the opposite


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## cardhu (May 26, 2009)

I agree there does seem to be some confusion in this thread ... the OP asked about the preferred rate associated with his chequing account, and responses to that question were somehow misinterpreted as remarks about gambits, which are not the same thing ... to clarify, a gambit is not a rate, preferred or otherwise ... it is a series of transactions completed through a broker (not a bank) in which a cross-listed security is simultaneously, or near-simultaneously, bought/sold in the US markets and Cdn markets, in order to move funds from one currency to the other without incurring forex fees. It has nothing at all to do with chequing accounts. 

Gambits are the way to go in some cases but not others ... economies of scale have to be considered ... not every US$ purchase is a car ... unless one has access to ultra-low trading commissions, a gambit could be an expensive way of changing currencies when only small amounts are required, and may present a challenge for people who don’t happen to already have brokerage account. I use gambits, and have for years, but there are situations where it just doesn’t make sense to do so. 



Cal said:


> Is 1.4% the best out there, or the preferred rate amongst the banks for the USD exchange?


1.4% is the rate associated with TD’s Select Service chequing account ... there could very well be better rates out there, but I was responding to your questions about TD’s rates.



larry81 said:


> I what i read in this thread is correct, i sould open a td select bank account in the company name to get the 'prefered rate' when i convert ?


I doubt it ... my understanding is that the preferred rate feature of that account doesn’t extend to TDW ... but that’s no great loss, the rates you’re referring to at TDW are already better than TD’s “preferred” rate ... If you already own some cross-listed shares, and they’re currently trading near or below their ACB, you could gambit quite easily in your non-reg TDW account without facing the obstacles referred to by some in this forum, and without triggering much tax obligation. If you don’t already own any suitable candidate shares, then the straightup conversion might be your best bet. 



Karen said:


> “Are you willing to move if they don't give you a good rate?”
> Actually, I don't think I am, PA. I just finished moving everything from TD to Scotiabank because Scotia gives me a better bonus on my GIC interest. That's probably more valuable to me than a slightly better exchange right. But I'm going to enquire anyway, and see what they say.


Karen ... you wouldn’t necessarily have to move all your business ... by all means ask BNS if they’ll do better than 2% on their forex fee ... you won’t know until you ask, but even if they agree, I suspect the difficulty you might face is getting it automated ... if its just a notation in your file, then having to call and remind them every time could get tedious, particularly if you're doing it several times a year. 

A small matter of materiality ... if you’re only changing $14,400US per year, the difference between Scotia’s 2.0% and TD’s 1.4% is only $84/yr ... not exactly a game-changer. If they won’t/can’t reduce the forex fee, and the $84 does matter to you, you could just quietly open a Borderless account at TD, then quietly shift the auto-deposit of your US Social Security payments over to that account, leaving everything else as it was ... its unlikely that doing so would interfere with your bonus GIC rates at Scotia.

One of the reasons I use the TD’s Borderless account is for the no-fee US$ Visa card. Credit card companies are far worse than banks for charging exhorbitant forex fees, so I use a US$ credit card during my travels into the US, or for any purchases from the US. Not sure if Scotia offers a $US credit card. I don’t think so. But then again, you may already have one, given the source of those monthly payments.


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## Karen (Jul 24, 2010)

Good point, Cardhu. The $84/year is not particularly important in itself, but I guess it's the principle of the thing. The bank manager is always telling me that I'm one of their best clients (it's a very small branch) and that I have the highest amount of GICs in any of their personal accounts, so I'd like to think they would give me whatever breaks they could. (I'm willing to bet that the only reason I have the most GICs in their branch, is certainly not that I'm their wealthiest client - I'm far from wealthy - but that that I'm their most cowardly one - I keep all my money, registered and unregistered, in GICs.)


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## Sustainable PF (Nov 5, 2010)

Why not just get a forex account with Knightsbridge or xetrade? Some extra leg work to set up but the banks don't seem to beat their rates. I had a great experience w/ Knightsbridge when we imported our '11 Outback last summer.


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## Plugging Along (Jan 3, 2011)

Karen said:


> Good point, Cardhu. The $84/year is not particularly important in itself, but I guess it's the principle of the thing. The bank manager is always telling me that I'm one of their best clients (it's a very small branch) and that I have the highest amount of GICs in any of their personal accounts, so I'd like to think they would give me whatever breaks they could. (I'm willing to bet that the only reason I have the most GICs in their branch, is certainly not that I'm their wealthiest client - I'm far from wealthy - but that that I'm their most cowardly one - I keep all my money, registered and unregistered, in GICs.)


I agree with you in principle. If you know the bank manager well enough (or even if you dont), then you should be getting the best service and rates. It doesn't matter how much other assets these other people have, the bank may never see any of it, they are seeing your GICS.


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## m3s (Apr 3, 2010)

Cal said:


> Is 1.4% the best out there, or the preferred rate amongst the banks for the USD exchange?


Maybe amongst the big banks



Sustainable PF said:


> Why not just get a forex account with Knightsbridge or xetrade? Some extra leg work to set up but the banks don't seem to beat their rates. I had a great experience w/ Knightsbridge when we imported our '11 Outback last summer.


+1

I've exchanged CAD-USD for 0.5% on Questrade, and far less on Interactive Brokers (0.1% maybe?). XE and Knightsbridge beat the banks handily if you don't have a brokerage acct. The banks "preferred rates" are a joke, just like their savings accts


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## Cal (Jun 17, 2009)

Thx, I might try Knghtsbridgefx...I liked thier site and will probably give them a call this week.

Will decide if I do a gambit as mentioned in the frugality thread on currency conversion after speaking w them.


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