U.S. Savings Accounts

When we think of savings accounts in Canada, we naturally tend to assume that they are denominated in Canadian dollars. After all, to buy most things in this country, you must use the local currency. However, many banks also offer savings accounts in U.S. dollars. Whether you are a frequent traveller south of the border, or you’re just looking to diversify your currency holdings, a U.S. savings account might be something to look into.


What is a U.S. savings account?

Like any savings account, a U.S. savings account is designed for you to save money (as opposed to conduct day-to-day transactions) – only in American dollars, versus Canadian. You can open these accounts at most Canadian banks and, of course, banks in the U.S. as well. Generally speaking, these accounts are not accessible via ATMs, and you cannot use them to perform e-mail money transfers.


Why open a U.S. savings account?

There are a couple reasons you might want to have a U.S. savings account:

  • If you regularly travel to the U.S. and, therefore, are constantly in need of U.S. currency. Having a savings account with American dollars inside it allows you to simply withdraw what you need before you head for the border (and not have to constantly convert – and pay currency exchange rates – to do so)!
  • If you want to diversify your currency holdings. You don’t have to be a currency speculator to want to diversify some of your savings out of the Canadian dollar and into American. Holding some U.S. dollars can help maintain your purchasing power if the Canadian dollar falls below the U.S. dollar.

What are the advantages of U.S. savings accounts?

Aside from just benefiting from one of the reasons listed above, there are some other advantages to having a U.S. savings account:

  • As with a U.S. chequing account (and many Canadian savings accounts), there is usually no monthly fee to maintain a U.S. savings account. You can also bank over the phone, in person or online, like with most other bank accounts.
  • Interest is paid on U.S. savings accounts; it’s not substantial but it’s better than nothing. For example, RBC currently pays 0.15% on its U.S. savings account. Other financial institutions offer tiered interest rates on U.S. savings accounts.
  • The exchange rate you can get is usually very competitive - certainly better than going to many currency exchange outlets, particularly at the airport.

What are the disadvantages of U.S. savings accounts?

Of course, for every advantage, there’s usually a disadvantage:

  • Other than 1-2 free transactions per month, each transaction costs you between $1-$3. Needless to say, these accounts are not meant for day-to-day banking activity.
  • U.S. savings accounts, like U.S. chequing accounts, are not connected to the Interac network and cannot do e-transfers.
  • If the Canadian dollar appreciates against the U.S. dollar, you will suffer an opportunity cost (i.e. you could have bought the U.S. dollars at a cheaper exchange rate).

Case study: Exchange now or later?

Melissa and John have a vacation property in Florida, at which they spend five months of every year. Rather than spending all five months there at one time, they often go back and forth between Canada and their home in the U.S. – and they are sick of paying the varying exchange rates each time they go. On average, they spend close to $3,000 USD/month while in Florida. With an exchange rate of $0.91 USD per $1 CAD, Melissa and John decide to open a U.S. savings account, convert an entire year’s worth of expenses (5 months x $3,000 USD = $15,000 USD) and deposit the U.S. funds into the account.

By the time they are ready to go on their first trip of the year, the exchange rate drops to $0.75 USD per $1 CAD. How much money did Melissa and John save by exchanging a year’s worth of USD ahead of time?

Currency Exchange at $0.91 $15,000 USD / $0.91 = $16,483.52 CAD
Currency Exchange at $0.75 $15,000 USD / $0.75 = $20,000 CAD
Difference $20,000 - $16,483.52 = $3,516.48 CAD*

*For the sake of simplicity we’re ignoring the cost of doing the conversions and the interest earned in the U.S. saving account.

By exchanging a year’s worth of USD and depositing it into their U.S. savings account, long before their first trip when the exchange rate was still good, Melissa and John saved $3,516.48 CAD.


One thing to consider before opening a U.S. savings account

If you own property and/or do business in the U.S. often enough, you may want to consider opening a bank account in the U.S. with a U.S. lender, instead of opening one with a Canadian lender. The application process is a little more complicated (you’ll need to apply in-person with your passport and at least one other document, such as your driver’s license). However, these accounts typically come with even lower monthly fees and better interest rates on U.S. deposits.

Opening and maintaining an account with a U.S. lender can also help you establish a credit history without a social security number, which would be important for anyone who wants to do business and/or own property in the U.S. So, before you open a U.S. savings account in Canada, do all your research and decide which option makes the most sense for your situation.