Of recent times, there have been issues concerning Canadians getting paid in United State’s dollars. This has made it be that immediately they cross the border, they have to face the labor of visiting the local banks to exchange their hard-earned money for some little U.S dollars. Although this method of converting is convenient, it is certainly more expensive. These Canadians are made to pay extra dues just to do business with the financial institutions which help them exchange their Canadian dollars.
The Banks’ Contributions
Coming to the exchange of local currency, we have to take note of the fact that there are two types of exchange rates:
The first is what the internet and other media houses tell you while the second is what the banks and financial institutions actually give to you when you come to exchange with them. They are totally two different rates and they are nothing close to each other when compared.
The lower rates show what they use when exchanging money among themselves and the other is different. The higher one is what they use when exchanging for the people and it is about 3% higher. This increase they justify with their clients by saying that it is what they benefit from doing these exchanges at local level.
Fluctuations In The Rates
Notwithstanding, these rates are not static and fluctuate with different financial institutions. The banks set their rates themselves and are made to include rates ranging from expenses involved in buying the dollars to administrative expenses in making these foreign currencies available to us. These include the Value Added Tax (VAT), ATM maintenance, banks and even the entire staff.
Despite the issues of Canadians getting paid in US funds, most Canadians don’t know that they can get the U.S dollar conveniently and still for less. It would benefit you for very little if you don’t make cross-border holidays or shopping trips, but if you do, then you must need it. There are many foreign exchange companies which offer these exchange rates significantly lesser than what the banks would offer you.
This is great information if you exchange large sum of money, or pay montage on a U.S vacation, or you even travel to Florida each winter during vacation for holidays. These companies are able to provide the rates because they combat the banks’ huge hidden fees, cutting the rates from something close from 1.57% to 2.5%.
The banks don’t have competition in price and have oligopoly (a state of limited competition, in which a market is shared by a small number of producers or sellers). These exchange firms provide these services by purchasing the foreign currency in bulk (at a cheaper rate the same way banks do). Some examples of these firms include the Canadian Snowbirds Association, the Knightsbridge, World First, CurrencyFair, Currencies Direct, TransferWise, and many others. It may be a fact that the powers of settling the United States exchange rates, but surely, these companies are using the advantage of bulk purchase to provide the services to the Canadian citizens at a nice rate.