U.S. Dollar Credit Cards

If you make most of your purchases in Canada, then you probably only need a credit card denominated in Canadian dollars. However, some people spend a fair bit of time in the U.S. Whether for business or pleasure, being south of the border means spending money using U.S. dollars. It is certainly possible to use a Canadian dollar credit card for these purchases, but it’s not particularly cost-effective. So, for those who often pay for goods and services in the U.S., another option is to get a U.S. dollar credit card.

What are U.S. dollar credit cards?

A U.S. dollar credit card is simply a credit card denominated in U.S. funds. What this means is that all purchases and payments made are automatically done with U.S. dollars. Unlike a Canadian dollar credit card, there is no foreign currency conversion done when using a U.S. credit card, which means you can save yourself some money by not having to convert your cash or pay hefty fees for using a Canadian dollar credit card – at least when our dollar is down.

For a list of US dollar credit cards in Canada, click here.

Why consider a U.S. dollar credit card?

As we mentioned, you can definitely use a Canadian credit card in the U.S. The problem is, every time you use a Canadian dollar credit card for a U.S. dollar purchase, you will be charged a foreign currency conversion fee, which is typically 2.50% of the transaction’s value. This isn’t a huge problem if you only visit the U.S. once every few years, but for more regular visitors it can add up quickly.

There are a few scenarios in which you might want to think about getting a U.S. dollar credit card:

• If you often purchase items from online retailers based in the U.S. You can avoid the currency conversion fees by making your purchases with a U.S. dollar credit card.
• If you do a large amount of cross-border shopping. This is another example where a U.S. card can help save you money (which is the point of shopping down there anyway, right?).
• Finally, if you often travel to the U.S. for business, or if you have a vacation home in the U.S. In either case, you will constantly be incurring expenses – and they won’t be cheap. You can avoid hefty conversion fees by using a U.S. dollar credit card.

It also helps if you already have a source of income or funds in U.S. dollars. If you put that in a U.S. dollar chequing account, you can then pay off your U.S. credit card without ever having to do a currency conversion.

 

Two types of U.S. dollar credit cards

Now, there are two different kinds of U.S. dollar credit cards. The first is issued by American banks and falls under U.S. banking regulations. Some American credit card providers, such as Chase, TD Bank ¹ and Capital One, allow Canadians to apply for U.S. credit cards even though they don’t live in the U.S. Others, like Wells Fargo, Bank of America and Citi Bank, do not permit Canadians to obtain a card without a U.S. address.

The second type of U.S. card is issued by a Canadian bank and is dominated in U.S. dollars. Assuming you live in Canada, this is the simpler option of the two.

Case study: Snowbirds in Florida

Gary and Elizabeth are both retired and spend four months of every year at their home in Florida. Between the two of them, they usually make $20,000 USD of purchases during those 4 months. To date, they have been using a Canadian credit card for all purchases, but are considering getting a U.S. dollar credit card to save on the 2.50% foreign currency conversion fee it comes with. How much per year would John and Elizabeth save by using a U.S. dollar credit card?

If the Canadian dollar stayed at $0.90 USD per $1 CAD, how much would they spend in CAD in those 4 months?

Spending in USD / Exchange Rate = Spending in CAD

On top of that initial currency exchange, how much would the couple then spend on currency conversion fees?

Spending in CAD x Credit Card Currency Conversion Rate = Currency Conversion Fees

Each year, Gary and Elizabeth would spend $555.55 CAD on currency conversion fees. If they switched to a U.S. dollar credit card, instead, they would immediately save these costs.

 

Is it worth it?

Whether a U.S. dollar credit card is right for you largely depends on how often you make purchases in the U.S. If you only do so occasionally, it may not be worth the annual fee on a card (for example, RBC’s U.S. Dollar Visa Gold Card costs $65 USD per year). If you regularly spend time and money in the U.S., however, a U.S. dollar credit card is something worth considering.

As a general rule, if you spend less than $3,000 USD per year on a Canadian credit card, it’s probably not worth paying the annual fee for a U.S. dollar credit card. At this level of spending, the currency conversion charge of 2.50% will only amount to $75 USD, so it may not be worth the hassle to spend almost all of the savings on the annual fee. But if you spend significantly more than $3,000 USD, definitely consider adding one to your wallet.

 

References and Notes

1. TD Bank is the American subsidiary of TD Canada Trust.