Investing

"Most" Affordable Method of Gifting USD from CAD to a US Resident?

  • Last Updated:
  • Aug 13th, 2021 11:28 pm
[OP]
Jr. Member
User avatar
Feb 26, 2015
155 posts
125 upvotes

"Most" Affordable Method of Gifting USD from CAD to a US Resident?

I have a friend in the US.
Let's pretend I want to give him $10000 USD.
My currency is currently Canadian.

Trying to find a method of sending it to him with the lowest fees. Every service seems to be percentage based and it's just robbery with larger sums.

I thought of Norberts Gambit via Questrade to get the funds efficiently transferred to USD. But then I cant figure out where to go from there. If I should put that USD into RBC or other bank and pay their transfer fees, or if I could link my friends US bank account to my QT and do a direct deposit to avoid fees all together. Disregarding security risks of that, I'm not even sure if that is allowed.

Any advice towards avoiding the 1-2% fees these transfer companies charge would be greatly appreciated.
20 replies
Sr. Member
May 18, 2017
508 posts
339 upvotes
Toronto, Ontario
Use Crypto/stablecoins if you both know how to handle it.
Deal Fanatic
User avatar
Jan 16, 2011
7175 posts
9148 upvotes
The NORTH
Make it $9,999 so that it doesn't trigger a Fintrac reporting requirement.
[OP]
Jr. Member
User avatar
Feb 26, 2015
155 posts
125 upvotes
whatyoulookinatbud wrote: Use Crypto/stablecoins
Thank you. You got to be right that crypto is the best play here.

Neither of us are very savvy in those areas, I think he wouldnt be able to figure it out to be honest. I would need a lot of brushing up on which platforms would be best. I recall in the past it was "Ramp on with Newton, buy litecoin, transfer those to another platform, trade for desired currency" and if offloading is the same process to make it worthwhile, I'll probably need to look elsewhere.
Sr. Member
May 2, 2019
723 posts
955 upvotes
Vancouver
Phreman wrote: Any advice towards avoiding the 1-2% fees these transfer companies charge would be greatly appreciated.
Not an investing question, it's more for Personal Finance forum. Anyway.

1% is too much. Sending through Wise (wise.com) is one solution, which would cost about 0.5% for 10K (edit: seems to be a bit more, maybe 0.55%).

Norbert's Gambit can get you a somewhat cheaper result, with more work. Hardly worth the effort for one time, for multiple transfers maybe. You'd need two USD accounts. One to link Questrade to, and that should be a Canadian bank that has easily accessible US subsidiary (RBC, TD, BMO). Then another USD account at the US subsidiary of the same bank. You'd be able to transfer funds across the border easily, should be free. I know at TD I'd be able to open a US-based checking account online and have no fees if I keep a $100 in it. You'd have to research the best account types for this to avoid extra transaction and maintenance fees.

I wouldn't do crypto unless you already researched it. There are still costs, caveats, and reporting requirements for CRA and IRS.
Last edited by yvrbanker on Aug 11th, 2021 1:03 pm, edited 1 time in total.
[OP]
Jr. Member
User avatar
Feb 26, 2015
155 posts
125 upvotes
IrwinW wrote: Every time I log onto Facebook, I see an ad for Knightsbridge FX, but haven't checked it out yet.
FX agencies like Knightsbridge and XE are definitely better than banks in this regard. They all keep their rates pretty hidden so comparing them is hard. I do believe they still charge a percentage, but accepting that might be my best option here if this Norbet's Gambit play through my investment broker doesnt pan out.
Deal Addict
Jul 13, 2007
1171 posts
683 upvotes
Toronto
$10k is pushing it, but I think you can load cash on a Starbucks gift card and it's usable in US$ at their exchange rate.

Not sure if anyone else does that. Amazon doesn't seem to. Maybe Uber does.

As for FX agencies, Transferwise (now known as wise.com) doesn't hide its fees/rates at all. It says it would cost CAD$55 in fees to exchange and transfer $10000, which works out to 0.5%, not bad. They're a publicly traded company, so you can clearly see they're not about to go bankrupt: https://www.google.com/search?q=LON:+WISE

I've used them between Europe and Canada from one person to another. No problems.
Sr. Member
Dec 14, 2004
926 posts
203 upvotes
Waterloo
Write a cheque and drop it in the mail. I know this isn’t ideal, but it works and there’s no fees.
Deal Addict
User avatar
Dec 8, 2010
2554 posts
983 upvotes
For a one off thing, it probably isn't worth the hassle of setting something special up. I know CIBC at least have a fairly easy to use online system of sending money to foreign accounts.

If you already have a Wise account, that'd be easiest and with a better rate, but bear in mind it can be a pain getting money in to them depending on what bank you're with (and whether or not you are comfortable giving them you bank login details - I for one am not).

Knightsbridge's rates are not the best - worse than Wise. Better than a normal bank though. Just be aware the recipient may have to pay incoming wire fees.
Sr. Member
May 2, 2019
723 posts
955 upvotes
Vancouver
daverobev wrote: I know CIBC at least have a fairly easy to use online system of sending money to foreign accounts.
Big banks like CIBC are promoting their transfer services recently. They still charge excessive foreign exchange fees for those, that's what OP wanted to avoid.

EQ Bank, on the other hand, has Wise transfers integrated; so one does not need additional time or effort to move money to Wise. I use EQ Bank for a dual purpose: a decent HISA rate and sending Wise transfers.
mre wrote: Write a cheque and drop it in the mail. I know this isn’t ideal, but it works and there’s no fees.
There are two parts of the OP's problem: converting the currency and delivering the funds to a US recipient. Wise/XE/knightsbridge solve both at once, for a moderate fee.

If OP does the conversion cheaper differently (e.g. with Norbert's Gambit), Canadian personal cheques cannot be used, as US banks won't know what to do with them. Instead, it's possible to mail a bank draft in USD. That can be free with some premium banking packages, otherwise costs around $10. Not the fastest way, but doable.

Mailing a US personal check would work, for which OP would need a US-based account and a check book. That's the scheme with two USD accounts on both sides of the border that I mentioned. If so, checks are optional, as there are other ways to move money within the US. (For one, they have something similar to Canadian e-Transfer, forgot the name.)

To mention a couple of minor points, the cheapest currency conversion is not with Norbert's Gambit, but with Interactive Brokers Canada. It's not practical though unless one has some investments there already, as there would be very long hold times between depositing in one currency and withdrawal in another.
Other ways to transfer wealth could be mailing them a debit or credit card that is designed for cross-border use (funded in USD, or having no foreign exchange fee). Or just paying their USD bills directly from here with a suitable card (e.g. BRIM, or Rogers Bank Mastercard).
Deal Addict
User avatar
Dec 8, 2010
2554 posts
983 upvotes
yvrbanker wrote: Big banks like CIBC are promoting their transfer services recently. They still charge excessive foreign exchange fees for those, that's what OP wanted to avoid.

EQ Bank, on the other hand, has Wise transfers integrated; so one does not need additional time or effort to move money to Wise. I use EQ Bank for a dual purpose: a decent HISA rate and sending Wise transfers.
Ya, which is why I asked if OP is just going to do this the once, or if it will be recurring.

Wise isn't that good - they are going to save max $150 I reckon. Which is fine, but if it's a one off, are they really going to go through the faff of setting up a Wise account?

I guess my thinking is that I have ended up with a couple of dozen accounts here there and everywhere more than I actually use, set up for a good reason or just a sign up bonus, but it means my personal info is all over, I get constant 'we've updated our terms!' and other assorted bullshit emails... I guess I'm turning into a 'time > money', 'time > hassle' kind of person. Must be old age...
Deal Addict
May 28, 2007
1542 posts
859 upvotes
HammerRFDer wrote: $10k is pushing it, but I think you can load cash on a Starbucks gift card and it's usable in US$ at their exchange rate.

Not sure if anyone else does that. Amazon doesn't seem to. Maybe Uber does.

As for FX agencies, Transferwise (now known as wise.com) doesn't hide its fees/rates at all. It says it would cost CAD$55 in fees to exchange and transfer $10000, which works out to 0.5%, not bad. They're a publicly traded company, so you can clearly see they're not about to go bankrupt: https://www.google.com/search?q=LON:+WISE

I've used them between Europe and Canada from one person to another. No problems.
I don't see anyone putting $10K on Starbucks gift cards. Then you're stuck buying Starbucks coffee or whatever they sell for $10K. How would you get the cash out of it if you just want cash?
Sr. Member
May 2, 2019
723 posts
955 upvotes
Vancouver
daverobev wrote: I guess I'm turning into a 'time > money', 'time > hassle' kind of person.
Not exactly the RFD spirit. :) To each their own, though.

OP asked for "any way" of reducing 1-2% fee on a 10K transfer, and was willing to jump through some hoops like Norbert's Gambit. That requires a USD account in Canada.
Without opening more accounts than that, could at least convert through Norbert's Gambit, I estimate around $20 cost, and then send a wire transfer to the recipient (something like $45 at RBC) or mail a bank draft (around $10). Still a decent saving over bank's foreign exchange markup (2.5%).
Deal Addict
User avatar
Dec 8, 2010
2554 posts
983 upvotes
yvrbanker wrote: Not exactly the RFD spirit. :) To each their own, though.

OP asked for "any way" of reducing 1-2% fee on a 10K transfer, and was willing to jump through some hoops like Norbert's Gambit. That requires a USD account in Canada.
Without opening more accounts than that, could at least convert through Norbert's Gambit, I estimate around $20 cost, and then send a wire transfer to the recipient (something like $45 at RBC) or mail a bank draft (around $10). Still a decent saving over bank's foreign exchange markup (2.5%).
Yup absolutely, depends on what accounts OP already has - I know you can do Questrade USD -> RBC Canada USD savings account, but it is then hard to move that USD anywhere.

Honestly forex is a scam, it costs the banks nothing, and they make it as hard as possible to use different ways.

If OP wants to have a proper USD account it is totally different. Use Interactive Brokers, basically no markup and a $3 trade fee. Actually you can probably do that with Wise - do CAD in to IB Canada, convert to USD, then out to the US Wise account.

Edit - because doing the forex in Wise costs a little more than 0.5% IIRC. Going via IB you'd only pay the $3 plus whatever Wise charges to send money in the same currency.
Sr. Member
May 2, 2019
723 posts
955 upvotes
Vancouver
daverobev wrote: Actually you can probably do that with Wise - do CAD in to IB Canada, convert to USD, then out to the US Wise account.
An interesting thought! Maybe not practical for OP unless there is an IB account already. There can be long hold times if IB is funded through EFT, should be possible to avoid. Fund the IB account in CAD from a bank account via a bill payment (shorter hold times), convert to USD, then wire USD to own Wise account. No fee for 1st IB withdrawal in a month (even a wire), but on the receiving side Wise will take $7.50. The rest is free I think: pear-to-pear Wise transfer in USD, then the recipient can transfer to their own US bank.
IB might even allow a third-party wire directly to the recipient, which requires pre-approval from their compliance department (maybe if sending to family?)

Edit: pear-to-pear USD transfer on Wise might switch to a wire transfer because of the large amount. If so, it should be another $7.50 or about.
Deal Expert
User avatar
Feb 8, 2014
25957 posts
10687 upvotes
Socially Distanced
I assume western union charges fees?

You also can't write a simple cheque?
I have sent money to a US friend using a cheque in CAD. Not 10K mind you.
In fact in Rand McNally they wear hats on their feet and hamburgers eat people
Sr. Member
May 2, 2019
723 posts
955 upvotes
Vancouver
Quentin5 wrote: I have sent money to a US friend using a cheque in CAD. Not 10K mind you.
Yeah, that would cost too much. US banks can be even worse than Canadian for currency exchange. Slow to clear Canadian cheques, too. I looked at Bank of America's calculator, and their rates are atrocious. They charge several % for conversion, while OP was looking for less than 1% fee.

Western Union and such are also quite expensive.
Deal Addict
Jul 13, 2007
1171 posts
683 upvotes
Toronto
RCML27 wrote: I don't see anyone putting $10K on Starbucks gift cards. Then you're stuck buying Starbucks coffee or whatever they sell for $10K. How would you get the cash out of it if you just want cash?
You've missed the point of my second line: "Not sure if anyone else does that. Amazon doesn't seem to. Maybe Uber does.". The thought is that you could do something similar with gift cards at places where you would spend a lot of money like Costco or Walmart. Costco cash cards work across borders and gets you official exchange rates from what I'm reading.

But thanks for pointing out that it could take a while to spend $10k at Starbucks. Didn't know that. Learn something new here everyday.

Top