A lot of Canadians are making money online these days. From selling virtual gaming items to selling real world things on eBay to bloggingmany Canadian bloggers are receiving payments via Paypal. The problem for Canadians however, is that they get stuck having to pay a hefty 2.5% Paypal currency exchange fee every time they convert from USD to CAD.
2.5% may not seem like a big deal but that is $2.50 on every $100 of income. $25 on $1000 and so on. Additionally, the exchange rate has been favourable to Canadians for quite some time and $1 CAD peaked at being valued as $1.06 recently. This means that on every $100 I only receive $91.50! Ouch! It all adds up and paying the Paypal currency exchange fee is not something i’m keen to do.
You may think, “lots of Canadian banks have USD accounts, why not just sign up using one”. Well, I tried that. I had a USD account set up at CIBC from when we did our new car import of our 2011 Subaru Outback from the USA last year. I had made a few attempts link this account to Paypal but the test payments Paypal sends to confirm an account exists. Paypal couldn’t tell me why it wouldn’t work, nor could CIBC. I then tried (and failed) with my BMO USD bank account. What was I doing wrong?
My error was my use of the banks I am associated with. A quick Internet search (which should have been done first – lesson learned) revealed that the accounts I was trying to use identifiers that Paypal recognizes as Canadian. Since Paypal states that we have to transfer to Canadian dollar bank accounts they could not recognize the USD accounts.
The Paypal currency exchange solution? The Royal Bank of Canada USD account(s).
What makes Royal Bank different than it’s competitors? By using a few pieces of information / information combinations you can establish a US bank account when you register your bank for Paypal withdraws. The following outlines what you need to do to transfer US funds to your Canadian based US dollar bank account and solve your Paypal currency exchange woes.
- Head to a Royal Bank branch , preferably one you can walk or bike to (may as well save gas!).
- You will ask the branch officer to open a RBC US Dollar account. This account costs $2 for 6 transactions per month. There is a second option where you can open a RBC U.S. High Interest eSavings account that has no fees if you can limit yourself to 1 monthly debit.
- You need to remember to get all the account details before you leave. You need the transit and account numbers. You will be provided a routing number but you don’t need that particular number – see below.
- Login into Paypal using your user ID and password. You will be directed to your My Accounts page.
- Click Withdraw (Transfer to Bank Account).
- In the Add a bank account page you’ll first need to change the country drop down from Canada to United States.
- The US bank account page appears and you are so close to curing your Paypal currency exchange issues. First enter in Royal Bank of Canada into the Bank Name field.
- Leave the Checking button selected if you opened a US Dollar account or Savings if you selected the High Interest eSavings account.
- This step is integral. With your account you will receive the routing number of a Canadian branch (021000021) – DO NOT USE THIS NUMBER. The number you need to use is “026004093” which is the routing number of a US Branch.
- You now enter in the account number. To accomplish this you need to answer the 5 digit transit number and the actual account number.
- With luck you’ve set up online banking. You will need to check the account for two small deposits that Paypal will ask you to confirm the deposits. Once you do this you should be able to transfer your US dollars to your Canadian based USD account.
If you have found this advice useful and are looking to exchange $5000 or more in a single transaction I highly recommend using Knightsbridge Foreign Exchange. The FX rate they offer is usually 0.50%-0.75% which is much lower than the banks (2.5%). You can call toll free in Canada or USA at (877)-355-KBFX (5239) or email firstname.lastname@example.org. They will ask you where you heard of their service and if you tell them SPF or sustainablepersonalfinance.com referred you we will receive a small affiliate percentage. There will be no additional cost to yourself but I am confident you will receive excellent, professional and fast service. You can also find additional services, for example World First, that can assist with your financial transfers.
Have you been losing chunks of money due to the 2.5% Paypal currency exchange fee? What steps have you taken to reduce these fees?