S. J. Kelley

Business Matters

How to get the most money out of Amazon royalties when converting to Canadian dollars

I was catching up on KBoards today and discovered that Amazon uses a very, very unfavourable exchange rate when converting payments from USD to CDN if you have them direct deposit into a Canadian bank account. Many try to get around this by ordering cheques in USD, but this comes with a delay and other bank fees. Alternatively you can set up direct deposit to a US bank account (they won’t direct deposit to a Canadian bank account that uses US funds; the bank itself has to be in the US). Conveniently, many Canadian banks have branches in the US, so it’s just a matter of finding one with a good fee schedule. The two popular choices seemed to be TD Bank and RBC. Discussions on KBoards seem to suggest that RBC may be slightly better for online transfers. Because I love the business side of things I decided to look further into it. I tried my best, but please note that I’m only human and I may have made some mistakes below. If you spot any, please let me know!

TD Bank costs $5.99/mth USD ($7.49 CDN) for “Simple Checking” but to do “person-to-person” email money transfers “you must have a TD Bank Personal Checking account, a unique United States phone number, a United States issued Social Security Number” (see here), and same goes if you want to do “online banking transfers” to external institutions (just $3 USD if you’re willing to wait 3 days, but useless with no US address). On KBoards there was some disagreement on how money could get out of the TD accounts (wire transfers are expensive: $40 USD).  To avoid high fees it seems most economical to get a Canadian TD account in USD (can get one with no monthly fee, just $1 CDN per transaction), transfer for free between the US and CDN TD banks, then either cash the money out at a local TD bank using their conversion rate, or do an email money transfer for $1.50 CDN to your normal institution and use their admin fee rate. The two options are outlined below, using PC Financial (PCF) as the everyday baking account. PCF charges 2.5% for currency conversion after conversion takes place; currently $1 USD = $1.2510 CDN, so $200 USD = $250.21 CDN and the fee would be $6.26. For the sake of argument, I assume only one deposit per month. All calculations are in CDN (I assume that US Bank site fee listings are in USD):

  • TD (US) > TD (Canada in USD) > PCF (in CDN): $7.49 in monthly fees + $1.00 transaction at TD (Canada) + $1.50 interac transfer + $6.26 admin conversion fee at PCF (2.5%) = $14.75, or 6.49% of the CDN value. 
  • TD (US) > TD (Canada in USD) > TD Converts: $7.49 in monthly fees + $1.00 transaction at TD (Canada) + $6.95 admin conversion fee (~2.78%) = $15.44, or 6.17% of the CDN value.

Meanwhile, RBC (US) charges  $3.95/mth USD ($4.94 CDN) for “Direct Checking” but doesn’t seem to have an email money transfer option. Wire transfers cost $75 USD. A Canadian USD account is only $2/mth CDN, and internal transfers to/from other RBC accounts are free, so once funds are moved into the Canadian USD account it can be sent to any banking institution by email money transfer for $1 CDN (your bank’s admin fee would apply to the transferred USD), or you could go to an RBC bank and convert the USD in your Canadian account to CDN.

  • RBC (US) > RBC (Canada in USD) > PCF (in CDN): $6.94 in total monthly fees + $1.00 interac transfer + $6.26 admin conversion fee at PCF (2.5%) = $14.20, or 5.68% of the CDN value. 
  • RBC (US) > RBC (Canada in USD)  > RBC converts: $6.94 in total monthly fees + $8.39 in RBC conversion fees (as determined by the difference between xe.com and RBC’s non-cash calculator; ~3.35%) = $15.33, or 6.13% of the CDN value.

Alternatively, if one is patient enough to wait for Amazon to send USD cheques, one could deposit them directly into ones personal banking ABM. Fees abound, however, depending on your bank. PC Financial’s “no fee” checking account, for example, charges $7.50 for deposited cheques $1000 or less, and $15 for $1000 or more, plus the 2.5% admin charge for the conversion.

  • Deposit USD check into TD Canadian USD account and convert: $1.00 transaction charge + $6.95 conversion fee = $7.95, or 3.18% of the CDN value.
  • Deposit USD check into RBC Canadian USD account and convert: $2.00 monthly fee +  $8.39 conversion fee = $10.39, or 4.15% of the CDN value.
  • Deposit USD check into PCF: $0 monthly fee + $6.26 admin conversion fee at PCF (2.5%) + $7.50 foreign currency cheque charge = $13.76, or 5.50% of the CDN value.

So the most economical rate appears to be going with cheques after all, with TD. For direct deposit, RBC and an external bank for conversion seems to be the best route, but it will cost a whopping 2.5% more that way.