Those Black Friday bargains south of the border may cost a lot more than you expected if you don’t take into account the exchange rate, duties and taxes, and credit card currency transaction fees.
Despite the weaker loonie, 27% of Canadians plan to do some cross-border shopping this year, according to Accenture’s 2015 Holiday Shopping Survey.
Just a couple years ago, the Canadian dollar was trading at or above par with the U.S. dollar. But a drop in oil prices has pushed the loonie down to around 75 cents, which means your money doesn’t go as far in the U.S. as it once did. At today’s exchange rate (US$1.00 = C$1.33), that US$100 pair of jeans you like now costs about C$133 or 33% more.
If you plan to stay in the United States for 24 hours or more, you can bring back up to C$200 (or about US$150) worth of goods without paying any duties and taxes. And If you’re in the U.S. for 48 hours or more, you’re allowed to bring back up to C$800 (about US$600) in goods without having to pay duties and taxes.
But if you’re not staying or plan on shopping online, you’ll have to pay duties or taxes on whatever you buy. What you pay will depend on what province or territory you live in and what type of item you buy.
Again, let’s assume you purchased jeans for US$100, which converts to roughly C$133. Using the Canada Border Services Agency duty and taxes estimator, your estimated duty and taxes will be $44.34 if you live in Ontario. When using the tool, choose elsewhere for where the product was made because even though the jeans were purchased in the U.S., it’s highly unlikely they were actually manufactured in the U.S.
Electronics, such as televisions, cameras, tablets, and phones, are only subject to tax, according to the duty and taxes estimator. So you’ll only have to pay up to 15% (PST + GST or HST) in tax depending on your province or territory. Alberta residents are the luckiest because they’ll only have to pay 5% GST.
Foreign currency transactions
Many credit cards also add a surcharge of 2.5% for foreign currency transactions. The foreign exchange transaction fee for converting US$100 to C$133 will be another $3.33 (2.5% of $133).
But there are some credit cards in Canada with no foreign transaction fees whatsoever, so you can save if you use one of those cards.
If you’re making an online purchase, one cost you might not have factored into your purchase is the customs brokerage fee. Not all shipping services will charge you in order to get your item cleared through customs, but some do. In this example, we’ll assume the customs brokerage fee is $15.
The final word
With all these additional costs in mind, here’s what the overall estimated cost could be for two different items you buy online:
The jeans you like will be nearly 100% more than the original U.S. price while electronics will be about 70% more.
The bargain you’re hoping to get on Black Friday might not be such a great deal after all. If the price looks too good to be true, that’s because it probably is.