Buying U.S. dollars and other foreign currencies is the next frontier for people who like the convenience and money-saving potential of doing business online.
Still obscure compared with online investing and banking, online foreign exchange has a lot of potential for snowbirds and others who travel out of country and are sick of lining up at forex offices where the rates aren't very good.
The newest entrant into the business is a U.K.-based company called Travelex that specializes in handling foreign currency exchanges for individuals travelling overseas. Travelex is a big player in online currency exchange in Britain, and now it's branching into both the Canadian and U.S. markets.
At travelex.ca, you can exchange Canadian dollars into 70 or so international currencies. You pay for the transaction online using your credit or debit card and Travelex then sends your foreign banknotes to you by courier for free (next-day delivery is available at no extra cost). If you have some foreign currency left over when you return, Travelex will buy it back from you at the same wholesale rate that the financial big boys get.
"It's definitely our experience that people have a tendency to bring back some currency with them," said Jon Dario, president of Travelex Currency Services Inc. "They'll scrounge all around to get the best exchange rate before they travel, and then they spend $30, $40, $50 to exchange back their leftover currency at the end of their trip."
Travelex is about convenience as opposed to offering the lowest possible exchange rate. "Our online price is better than some other locations," Mr. Dario said. "The main value for customers is going to be the convenience factor - free delivery to homes - and no service fees."
Clearly displayed pricing that helps you comparison shop is something else Travelex offers. In the late morning Monday, it priced a Canadian dollar at 93.94 cents (U.S.) on its website. Over at the TD Canada Trust branch in my office building, the dollar was pegged at 95.62. At an Accu-Rate Foreign Exchange office across the way from the TD branch, the dollar was pegged at 96.42.
Even better was the price of 97.50 cents that was offered by Western Union Canada's online FX service, formerly known as Custom House. Setting up an account requires you to provide a copy of a bank letter or a statement for a saving or chequing account at a Canadian financial institution. Once you're up and running, you can log in to the Western Union website, buy however much foreign currency you want and have it deposited into a U.S.-dollar chequing account held at any bank.
Payment for your transaction is carried out by having Western Union debit your bank account, or by sending money to the firm through your online banking website. If you buy some foreign currency on Monday morning, the transaction should be completed by Wednesday.
Andrew Endl, senior foreign exchange dealer at Western Union in Calgary, said the firm uses wholesale rates that undercut the retail rates used by the banks. "I've seen us anywhere from half-a-cent to 2.5 cents better than the banks on some transactions."
Western Union has an additional price advantage in that it resets its exchange rate every 30 seconds, compared with as infrequently as once or twice at day at other forex outlets. If the loonie moves to your advantage, you can capitalize instantly with your Western Union account by booking a foreign exchange transaction.
If you're a snowbird bulk-buying $10,000 or more in U.S. dollars, Knightsbridge Foreign Exchange Inc. says it offers competitive rates for currency exchange.
"We have an online bill payment capability with some banks so clients can transfer funds online, which is convenient and free," Rahim Madhavji, Knightsbridge president, said in an e-mail.
For snowbirds, one more option for buying U.S. dollars is the currency exchange service run by the Canadian Snowbird Association. This service will take money out of your Canadian bank account and then pool it with other CSA members to make a bulk buy. Rate comparisons on the CSA website show substantial savings over bank rates.
Speaking of the banks, they compare well on an international basis when it comes to pricing foreign exchange transactions for clients.
"I know it's probably going to be a surprise to you, but Canadians are paying pretty good rates relative to a lot of other countries," Travelex's Mr. Dario said. "That's particularly true in the United States - Canadian rates are much, much better, without a doubt."
The Online Forex Alternative
Four cheaper and/or more convenient ways to exchange Canadian dollars into U.S. currency than using your bank...
Canadian Snowbird Association currency exchange program
Details: Bulk purchasing of U.S. dollars cuts your cost. Funds are withdrawn from your C$ account and transferred into your US$ account. Fees of up to $5 per month for each month a transfer is made.
Knightsbridge Foreign Exchange
Details: Competitive exchange rates for transactions of $10,000 or more. You can pay for transactions through online bill payment on some bank websites.
Details: Buy foreign currency online and have it couriered to you at no extra cost. Pay online by credit card or debit.
Western Union Canada online FX (formerly Custom House)
Details: Lets you pull money out of your Canadian chequing account, convert it into U.S. dollars at an attractive rate and then deposit it into a U.S.-dollar account.