US dollar credit cards in Canada

How do US dollar credit cards work?

A US dollar credit card can be helpful for Canadians who regularly travel to or shop in the US by saving you money on exchange rates and foreign transaction fees. The card holds a balance in US dollars, which means the bank won’t need to convert your Canadian currency into US dollars on every transaction.

If you shop in the US with a Canadian currency card, you’ll typically be charged a foreign transaction fee, which sits at around 2.5% of your transaction. This is in addition to the money you lose on exchange rates.

For example, if you spend $1,000 in the US, your credit card will make a profit by marking up the exchange rate and charging around $25 in currency conversion fees. With a US dollar credit card, you can save at least that amount on every $1,000 you spend.

That being said, a US dollar credit card is only suitable for Canadians who have access to a source of US dollars to pay off their balance. One example of this would be a freelancer who lives and works in Canada but is paid in US currency. If you pay the balance in Canadian dollars, your bank will charge you to convert into US dollars, which will void all of the cost-saving benefits of the card.

Who should consider a US dollar credit card?

US dollar cards are useful, but they’re not for everyone. You might want to consider this type of credit card if you do any of the following frequently:

• Make purchases in the US. If you regularly pay for purchases in US dollars from your Canadian account, this could be a good fit for you. An example of this would be if you often order products online from an American company.
• Travel to the US. You might like a US dollar credit card if you spend a lot of time in the US, for either work or vacation. For example, snowbirds who spend part of the year in the US would benefit as well as people who are there often for business.
• Have a source of US income. This type of card only makes sense if you can pay your balance off in US dollars, which means you need to have a source of US funds. If not, the bank will have to convert your Canadian dollars into US dollars and you’ll likely no longer save money on conversion fees.

US dollar cards options for Canadians

US dollar credit cards are offered by most major Canadian banks as well as some other providers. Compare your options below.

Which option is right for me?

The type of card that’s right for you will depend on your unique circumstances. Look for the following features to help you decide which offers the best deal.

• Low fees. Look for a card that offers a low fee or waives the fee in the first year.
• Rewards. Some cards offer points for every dollar you spend, so that you get some sort of return on purchases.
• Welcome bonus. Many cards have welcome bonuses so that you can earn points or cashback faster.
• Basic insurance. If you want included insurance, search for a card with purchase protection and extended warranty coverage as a bare minimum.
• Travel insurance. If you travel extensively, look for a card that offers emergency medical, trip interruption and cancellation and other forms of coverage.

• Travel discounts. Some cards offer discounts on flights and car rentals, so look for one that offers the benefits you want.

What to watch out for

• Non-US exchange rates. You may not have to pay currency conversion fees for purchases in the US, but you’ll still need to pay them in other countries.
• Fees in US dollars. All of the fees on the card will be charged in US dollars, so there will be a markup on what you’ll have to spend.
• High interest rates. Many cards have an average interest rate of around 20% on your outstanding balance. These rates are calculated in US dollars, so they’ll be higher than those charged on the same amount in Canada.

Bottom line

US dollar credit cards can be suitable for customers who regularly shop, work or travel in the US. These cards can help you save money on currency conversion rates and exchange rate markups, but you’ll need to pay off your balance with US dollars to make them worthwhile.

Frequently asked questions

• Can I use my US dollar credit card to make purchases in the US from Canada?

  Yes, you can use your card in Canada to make purchases online in US dollars.

• Should I get a US dollar credit card if I'm going on a short trip to the US?

  Probably not. If you plan to make several repeat visits to the US over the course of the year, then this could be a good choice. If you’re only going once for a short trip, you might want to consider a different type of card.

• Would I be better off opening a US bank account or using a US dollar credit card?

  It depends. If you live in the US and can open a bank account, it might make it easier when you need to go into the bank for customer service.