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A Questrade account allows you to convert your Canadian dollars to USD conveniently, whether you use the proceeds to acquire US stocks or exchange-traded funds at opportune moments such as recessions, to diversify your accounts, or to have USD ready in case you travel to the United States. When you sign up to Questrade, whether it’s a registered account or non-registered account, they automatically open both a USD account and a CAD account for you.
At any given time, investors might need to convert their Canadian dollars to US dollars. Questrade does not automatically convert CAD to USD when you purchase US stocks. You must first convert your Canadian dollars to USD. You can also link your USD account to your Questrade account to start trading US stocks.
There are two primary ways of converting your CAD to USD.
The first and more straightforward method involves simply paying a 2.0% fee on the value of the transaction; it usually takes 0-2 business days to convert your Canadian dollars to USD successfully. In the second method, commonly known as Norbert’s Gambit, you pay a $5-$10 charge depending on the volume of the transaction, and this usually takes 4-7 business days for the transaction to be completed.
Both methods have their pros and cons. We will be going through them in this article to educate you on which one is best to use, depending on the situation. It’s important to note that the currency exchange fees are determined in the currency after the conversion.
Equity investments are subject to market risks and may not be suitable for all investors. If you have any doubts as to the merits of an investment, you should seek advice from an independent financial advisor. So please invest at your own risk.
Method 1: The Straightforward Method
To pay the 2% fee to convert your Canadian dollar to USD:
- Open your Questrade account on your browser and go to the main menu.
- Go to requests and click on exchange funds.
- Select the type of account (whether you are using a margin account, tax-free savings account, etc.).
- Specify from which currency you are converting(CAD to USD or USD to CAD).
- Input the amount you wish to convert, and then submit.
Questrade will automatically convert your CAD to USD. The transaction is processed the same day and usually does not exceed 24 hours, but this will depend on the volume of transactions. You can monitor the transaction by checking the request history tab. When funds are exchanged, Questrade updates the tab to “processed.” The fees are usually deducted from the amount of the exchange rate.
If you wish to cancel the transaction, the option remains available on your Questrade account for about an hour after the request is issued.
This method is far more cost-effective if the investor wants to convert USD into small amounts, but the higher volume transactions are much more expensive.
Method 2: Norbert’s Gambit
Norbert’s Gambit was developed in 2001 by a Libra investment management financial planner named Norbert Schlenker. It is an excellent way to avoid currency exchange fees that can easily be exorbitant on higher volume transactions.
This method involves using the same shares listed on both the United States and Canadian exchanges—essentially, buying a Canadian-listed ETF and having your brokerage convert it into a US-dollar ETF. Although any dual-listed security can be used, the preferred exchange-traded fund is the Horizons US Dollar currency ETF (DLR.TO and DLR.U). This avoids currency risk since the CAD-USD exchange rate is volatile.
The DLR.TO fluctuates depending on the exchange rate and will vary depending on the bid price in the market. At the same time, the DLR.U tends to be relatively stable. when converting Canadian dollars to US dollars, the foreign exchange rate is when buying DLR.TO will apply.
Executing Norbert’s Gambit
- Open your Questrade account, go to Order Entry, and input “DLT.TO” to buy shares.
- Journalize your DLR.TO shares into DLR.U. There are two ways to do this:
- Desktop: On your Questrade account, go to the “Contact Us” tab, fill out the form, and select Self-Directed Account.
- Mobile: On your Questrade account, go to the menu page, click on “Help,” click the email icon at the bottom of the page, navigate to the “Tell Us More” section, and write to Questrade requesting the journalization of your desired amount of DLR shares into DLR.U.
- Questrade usually responds on the same day or at most two days, specifying the date when the transaction will be complete. The processing usually takes 4 to 7 days from the DLR shares’ purchase date.
- Sell the DLR.U shares once the journalization is completed. The resulting proceeds are in USD.
- You can transfer these funds to your USD account to continue investing or use them for other purposes as USD cash.
Conversely, Norbert’s Gambit can also be used to exchange USD for Canadian dollars. This method leaves the investor with more money to utilize, compared to what would have been spent on fees had method 1 been used for higher-value transactions.
The Questrade exchange rate applies after the transaction, and the commission fee is denominated in USD. As a result, Norbert’s Gambit stands as the better method to avoid currency risk.
Converting CAD to USD in a Nutshell
We have explained the two ways to convert CAD to USD on Questrade. The more straightforward method of paying a flat 2% fee on the value of the transaction takes a max of 2 days to complete, while Norbert’s Gambit takes between 4 to 7 days to process, but is excellent for high-volume transactions. This second method also involves a few more steps, such as emailing Questrade, but they will reply within two days. If you are converting a large amount, then Norbert’s Gambit is the ideal method to use.
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