How the Loonie’s Parity Actually Feels in Your Wallet

For ordinary Canadians, the parity party seems to have started just a tad too early. Sure, on television and in financial press, we are bombarded with all the “kudos to us” for our icky dollar trading on par with the greenback after “only” 30 years. I don’t know about you, but after a “little” shopping binge online, my dollar is still not buying stuff at par prices.

When I looked at the conversion rates, I’m still not getting a full U.S. dollar for my loonie. The best I got on some books was US$0.9837 and the worst was on a pair of “JP Todd” flats at US$0.9721. And, when I add to that whatever FX conversion fee my credit card company charges, I suppose I’ll have to listen again to my husband’s lectures on my spending habits. Oh well, nothing I can do about that, but is there anything Canadian consumers can do to benefit from the currency parity that currently exists only on foreign exchange trading desks?

Firstly, if you are traveling south and plan to go for a little shopping, make sure you have converted some dollars into cash. While when traveling credit cards are a great way to pay for hotels, car rentals, etc., it is better to pay with cash for smaller transactions. You will avoid arbitrary conversion rates over which you have no control, and you will most certainly avoid paying exorbitant FX conversion fees charged, both of which are imposed by your credit card companies.

Also, if you are planning to exchange your Canadian dollars for U.S. dollars, do a little exchange rate “shopping.” Meaning, check out what foreign exchange “shops” are offering. In my experience, shops on Yonge Street in Toronto have always had better deals and lower fees than major banks.

Finally, call your credit card companies and ask which is charging what foreign exchange conversion rate. These fees are usually rolled together with the actual FX rate into one charge on your credit card statement. Just in case, verify how much more the value of your Canadian dollar is going to be eroded against the greenback.

According to the Financial Consumer Agency of Canada, large financial institutions in Canada charge on average the foreign exchange conversion fee of about 2.5%. In that regard, credit unions and trusts offer much better deals, charging those same fees within the range of 1.8% to two percent.

Just in case you were wondering when ordinary Canadians would finally be able to experience true parity, the answer is most likely when the Canadian dollar trades at about US$1.03. At that point, and taking into consideration all the fees and charges, your dollar will be worth the same on both sides of the border.