A friend of mine is making preparations to leave on a big European adventure, and trying to get everything ready before she leaves. One of her recent questions on Facebook was regarding how to be paid as a US-based contractor via PayPal and not lose any excessive money due to currency conversion.
This is actually a tricky problem for a few reasons. First, most banks in Canada only deal in Canadian dollars. If you want to deposit USD into your CAD account you can, but the banks usually tack on an extra 2-3% to the base rates as another way to make money from you. Only a $100 it’s not a huge deal, but when you’re dealing with $1,000s of dollars the difference can add up to a week’s worth of groceries abroad.
The astute reader might right away think that the solution is to open a USD-based account at one of the larger banks, such as TD’s Borderless Plan. The problem with this solution is that what you are actually opening is a Canadian bank account that is denominated in USD. While you can still add and remove USD from your account, external services like PayPal will not allow you to link to that account because it is not based in the USA. Because of that, a person would still need to convert their USD on PayPal into CAD before transferring, once again losing money due to the conversion.
I recently read about TD’s Cross Border banking, and thought I would give it a try. Instead of being an USD denominated Canadian bank account, TD’s Cross Border banking will actually use the US subsidiary of TD Canada Trust, TD Bank in the US, to open the account at one of their branches. What you’ll end up with is a proper USD account at an actual US TD branch.
How To Open It
If you’re a TD member, you can visit the TD Cross Border Banking website and complete the sign-up process. It only takes about 10 minutes, and when you’re done you’ll have a USD based account. I chose the Convenience account which has the fees waived if you deposit at least $100, since I hate paying monthly fees.
A couple potential pitfalls to be avoided are:
- At one point it will ask you if you want to be sent a Visa Debit card linked to your account. You definitely want to say yes, as that’s the main way you can spend your USD money abroad. You’ll also be able to use that number to log into the US-based banking to see your account activity.
- Make sure when it asks for your CAD account information that you enter it properly – this will link your US and CAD accounts so when you login to your Canadian Easyweb account you will be able to see your balance.
- To fund your account you can either do a wire transfer to your USD account by calling TD on the phone, or transfer funds via your Visa Debit card online (the option is International Money Transfer on TD’s Easyweb site)
- Make sure you write down your US Branch Information as well as the US routing code and account numbers to gain access to your account. When I called to ask for help later they required this information.
How It Works
First, the good news. I successfully linked my PayPal account to my USD account, which is something I was never able to do with my Borderless plan. That means whenever I receive USD comissions on my website via PayPal I can transfer them into my US account without incurring any penalties on the conversion.
Now the bad news. There’s no real easy way to get a USD cheque into that account. I went to download the “TD Bank” application on my iPhone, but I am unable to because I only have a Canadian iTunes account. Once my Visa Debit card arrives I’ll try opening a US iTunes account, at which point I should be able to download the TD Bank application and do a mobile cheque deposit. But not all Visa Debit cards work with iTunes, so it may not work.
The second option is to physically mail the cheque to the branch for deposit. That’s a bit of a pain, but it’s still a workable solution. I have one cheque here from Amazon that is based on a Seattle bank, so I’ll try to mail it shortly and see how long it takes.
If you’re only dealing with a few hundred dollars here or there, or rarely visit the United States, this process will likely be more trouble than it’s worth. But if you receive any cheques or PayPal deposits in USD, the extra headache may well be worthwhile, especially if you can save $50-$100 in currency conversions a month.
Does having a U.S. Based account lead to any tax implications with the IRS etc if you do a larger volume of business through it, even though your a Canadian citizen?
It’s a good question, and I’ll have to call them about it. A quick read seems to show that any interest earned in a US bank account is taxable income and must be reported. But it also appears you can fill out a form at the bank to show that you filed taxes in another country with a tax treaty and it’s all good.
I understand that the U.S. now tracks/limits transfers of $3000. Wouldn’t that be a concern using a U.S. account?
HI Duane
Were you be able to open an US iTunes account using your TD U.S. Dollar Visa Card?
Thanks.
Thank you so much for making this article Duane. I had a similar problem with my Borderless Account of where I wanted to transfer USD funds to my Borderless Account so that I could pay my US Dollar VISA Credit Card. Unfortunately every which way I tried, I could not have USD currency transferred to the Borderless from my PayPal because it would want to convert it to CAD and then naturally once the transfer would be completed, it would be converted back to USD therefore taking double hits on the currency conversion. I also found out that unlike other Credit Card Institutions, TD does not accept payment from PayPal so that wasn’t an option either. So after further investigation, it appears my only option is to open a Cross-Border Banking Account and have that account added to PayPal, then have the funds transferred and finally from there Pay the US VISA Card. Finding your article was further confirmation that my research was correct and that I would be able to come up with a solution to my problem.