It’s very tough to get a good rate on U.S. dollars for a vacation.
For example most Canadian dollar credit cards will tack on around 1.5 cents as the bank’s exchange fee and then add another 2.5% to that. For a total around 4.0%. And they will hide this in with the wholesale exchange rate. I just looked up an actual example. On August 30 the wholesale exchange rate to buy a U.S. dollar was $1.261. I made a U.S. dollar purchase on that date with a Canadian dollar credit card and the exchange shown is 1.30285 or 4.185 cents and 4.185% above the wholesale rate.
A debit card is even worse and will add 3.5% over and above the bank’s standard 1.5% or so. For a total of about 5.0%. At least that is the fee for TD Bank debit cards.
You could carry paper U.S. dollars and can probably get those for a fee of around 2.5% (but maybe more) at your bank. But realistically we pay with plastic most places.
A partial solution is to have a U.S. dollar credit or debit card.
But you still need to have U.S. dollars to pay your U.S. dollar credit card balance.
Today I was wanting to transfer some money into a U.S. dollar bank account that I have.
Doing so through TD Direct is supposed to be my cheapest route at T.D. But I found they wanted 3.0 cents above the wholesale rate for amounts of $1000 or $5000 and not much lower than that even if I did $10,000 or $25,000. I ended up calling TD Direct and they did it for 1.8 cents above the wholesale rate. So, in this case it was worth phoning in.
I find all of these rates even 1.8% to be too high. 4.0 and 5.0 cents above the wholesale rate is outrageous and the banks charge it just because they can get away with it. (Which is why owning some big bank shares is usually a good idea).
So, how to get around it?
If you have a U.S. dollar margin account for investing you can accumulate U.S. dollars there through capital gains or dividends and transfer those to a U.S. dollar bank account to pay your U.S. dollar credit card. It’s not worth doing this just for exchange rate savings since it creates tax complexities. But if you have U.S. investments outside of registered accounts this might be an option. You can also move Canadian dollars to the U.S. side of a non-registered investment account using “Norbert’s Gambit”.