- Looking to transfer money to Canada?
- Discover cheaper ways to do currency transfers USD to CAD than most US banks.
- Learn what to look for when choosing the best way to transfer money.
Do you need to send a family member, friend, or Canadian business money from inside the United States? This article gives you the basics of using money transfer services, banks, and e-wallets for your transaction.
In this guide
- Common reasons people transfer money overseas to Canada
- Why you shouldn't send money overseas using your bank
- Is it safe to use a money transfer company?
- USD / CAD exchange rates
- What are the fees?
- Minimum and maximum transfer amounts
- Alternative ways to send money to Canada
- Business vs. personal considerations
Common reasons people transfer money overseas to Canada
People send money to Canada every day. In fact, digital remittances to Canada are expected to reach $1.6 billion in 2021. Reasons funds are transferred to Canada include:
- Settling e-commerce suppliers.
- Sending friends or family members money.
- Purchasing goods or services in Canada.
- Covering tuition fees for university or school.
- Paying for emigration costs.
- Paying for a wedding.
- Making a charitable donation.
Why you shouldn't send money overseas using your bank
Sending money to Canada using a bank wire transfer is not the best option. Unless you're transferring amounts over $5,000, using a wire transfer is expensive, and you have cheaper options that save you on commissions and fees.
A bank wire is also the slowest method of paying someone. It takes the bank up to 5 days to process the transaction. Overall, the banking system is less than ideal for processing international transfers from the US to Canada.
Is it safe to use a money transfer company?
Using a money transfer company like OFX, Wise, XE, or WorldRemit are excellent alternatives to using the bank when sending smaller amounts of money from the US to Canada.
Check the Finity list of approved retail transfer companies, and compare the rates and transfer times to find the best deal for your transaction.
USD / CAD exchange rates
When you send money from the US to Canada, your bank charges you a commission based on the total amount you want to transfer. They do this by adding a surcharge to the exchange rate, known as the margin rate.
The bank will give you a lower rate than the spot price on the pair, and they bank the difference in commission.
Typically, the margin rate is more expensive with a bank than using retail money sending services. Both options are more costly than using alternatives like e-wallets and cryptocurrency.
What are the fees?
There are other fees involved with sending money to Canada from the United States. You'll need to take into account the transaction costs and additional fees involved with different services.
What is a typical fee?
The margin rate is the largest expense in the deal. However, transaction fees are also expensive with the bank. Typically, the bank charges around 5% of the total transaction cost for processing the transaction. Average transaction costs range from $25 to $65 on the sender's side and $15 to $30 on the recipient's end.
Fees with retail money transfer companies are somewhat cheaper, at around 3% of the transaction value. That's still relatively expensive, and you have more affordable alternatives with e-wallets like Apple Pay and Google Pay.
Can fees be avoided?
If you want to send money to Canada, you don't need to use a bank or retail money transfer service. There are plenty of e-wallet options, and you also have cryptocurrencies for carrying out your transactions.
However, it depends on what your recipient is willing to accept. For instance, businesses likely won't accept payments for products and services using cryptocurrency.
Minimum and maximum transfer amounts
Most retail money transfer companies like OFX, Wise, XE, and WorldRemit have caps or limits on the amount of money you can transfer. Typically, their limits are between $7,000 to $10,000, in order to prevent money laundering through the platforms.
However, banks and retail money transfer companies may also have minimums on the amount you can send. If you're sending less than $1,000 to Canada, it's a better idea to use an e-wallet service like Google Pay or Apple Pay.
The service fees and transaction cost for small amounts with banks and retail money sending services make it financially unviable to use these options.
Alternative ways to send money to Canada
If you don't want to use the traditional bank transfer of retail money sending solutions, you can send money to Canada using alternative financial instruments. Google Pay and Apple Pay are popular, and so is PayPal.
Cryptocurrency is also gaining popularity, and it offers more affordable transfer fees than banks, retail money transfers, and e-wallets. Some cryptos like Ripple (XRP) offer fast transaction times with commissions as low as 0.5% on the transaction.
Business vs. personal considerations
If you're sending money through a wire transfer, the bank already has all the information they need on file to comply with AML and KYC procedures to prevent money laundering.
However, suppose you send cash through a retail money transfer service like Xe. In that case, both the sender and recipient must produce their IDs and provide their cellphone numbers when sending or receiving money.
How can I fund my money transfer?
You can send money to Canada using several methods. Popular options to fund your wire transfer include cash, debit card, credit card, or for large amounts, a bank wire. Crypto payments are also gaining in popularity.
How fast can my money transfer be sent to Canada?
If you're sending money using Western Union or other money exchange transfer services, you can expect transfer times between one to three days. Bank transfers have the longest transaction times, taking up to three days. E-wallet payments like PayPal, Venmo, Apple Pay, and Google Pay offer you the fastest transfer times, taking less than an hour in most cases.
What are the money collection options?
Sending directly to the nominated person's bank account is the easiest option. If you're using a retail exchange and transfer service like MoneyGram, the recipient can collect their cash from any partner location across Canada.
Are there any tax considerations?
If you're sending money from the US to Canada, you'll need to stay within the gift tax limitations to avoid paying penalties on your tax return. The IRS allocates US citizens with a $15,000 gift tax allowance for the year. Exceeding this threshold exposes you to tax liability. Consult with a CPA or tax attorney for advice.