Canadian Banks And The Foreign Exchange Shell Game

Recent posts described my search for a Canadian credit card with no Foreign Exchange Transaction Fees.  At the moment there are only five, four if you eliminate HSBC's World Elite MasterCard which is only available to HSBC high income, high net worth clients.

If you enquire at your bank about a credit card that does not charge FX Transaction Fees they'll make you an offer that they think is just soooo great.  They'll offer the full meal deal, a complete package with no FX transaction fees.  Are you ready?  The package includes your existing Canadian bank account and credit card PLUS, through their US subsidiary, a US funds bank account and US funds credit card.  Easy peezy, you use the US card in the States and for online shopping at American sites and make all payments on the US credit card from your US bank account.  Viola, no FX transaction fees!

There's a catch, right?  Sure there is.  If you're a typical Canadian retired boomer/snowbird, eventually you'll have to fund that US bank account.  With what?  A transfer of course.  From your Canadian bank account where all your money is.  And, guess what?  For the transfer they'll be charging today's exchange rate plus, at least 2.5% and as much 4%.  At the end of the day it's exactly the same, or worse, as if you'd used your Canadian credit card and paid the 2.5% FX transaction fee on each and every purchase.  And, by the way, that great banking package they offer comes with a whole set of fees of its own.  Our Canadian banks do love their fees.  I wrote about this way back in 2011 Canadian Banks - We Love 'Em And Hate 'Em

Is there anything one can do?  You bet, it goes right back to the need to source out and obtain at least one of the few Canadian credit cards that do not charge FX transaction fees.

If you're a snowbird and have a vacation home in the US and need a US bank account to pay things like HOA fees, property taxes, utilities etc. you should open your own US account with a US bank. It's easy to find an offering with zero fees when you make it clear you don't want any interest as you sure as heck don't want a wee bit of US interest income to trigger the IRS thing.

Again, you'll be in a position whereby you have to fund that US bank account from time-to-time.  Every bit of research I've done leads to a single solution for this.  The Snowbird Currency Exchange Program offered by the Canadian Snowbirds Association beats all others.  Their once monthly "buy" of thousands of dollars on behalf of their membership results in huge exchange rate savings.  Check it out Snowbird Currency Exchange Program

A Bit More About Canadian Credit Cards and Foreign Exchange Transaction Fees

In the previous post I related my experience with the excellent offering of Chase Canada.  The Amazon.ca Rewards Visa met all of our US shopping needs for five consecutive winters in Arizona.  NO Foreign Exchange Transaction Fees, NO Annual Fee and Cash Back. The cash back was automatically credited to the account each month.  This came to a sudden end last winter when Chase withdrew from the Canadian Credit Card business and closed all accounts on March 15.

So, there we were, in Arizona for the winter needing to source out and apply for a replacement card with no FX Transaction Fees.  As usual, we turned to Professor Google.  This was in early February.  We quickly discovered the Home Trust Preferred Visa card and the Rogers Bank Platinum MasterCard.  A bit of research revealed that both of these had been around for a while.  Curiously, neither were being aggressively promoted.

When introduced, the basic Rogers MasterCard offered filled the bill with No FX Transaction Fees, No Annual Fee and 1.5% Cash Back.  Sometime later, Rogers began charging 2.5% Foreign Exchange Transactions Fees.  They offset this fee by upping the cash back on all FX transactions to 4%.  So, it was a wash, still the equivalent of 1.5% cash back.  A downside for this card is that the cash back accumulates and is applied to the account each January, and then, only is you remember to make the specific request each December.  Note: This info relates to the offering last February.  There have been changes since then.

Alternatively, the Home Trust Preferred Visa was similar.  No FX Transaction Fees, No Annual Fee but with reduced cash back of just 1%.  One difference, while the cash back similarly accumulates throughout the year, it is automatically credited to the January account without the cardholder having to do a thing.

In the end, we choose the Home Trust card with the lower cash back.  The main motivator for this decision was the fact that it's a Visa which is the only card accepted by Costco in the USA.  Yup, the reverse of Costco Canada.  In Arizona, Costco is one of our main shopping destinations for all the usual reasons.

Since February, there has been a couple of new cards introduced which do not apply foreign exchange transaction fees.  Watch for info about these in coming posts.

Canadian Credit Cards With No Foreign Exchange Transaction Fee

I've been away for nearly four years.  They've been four great years. Our real estate investment in Arizona has provided a winter getaway and enabled us to escape Manitoba winters.  2018 was our fifth full winter in Arizona. For us, a full winter is January through April as the practice has been to hang in 'til after Christmas with family.  On Boxing Day we tidy up and it's a run for the border on December 27.  This year may be different as I finally fully retired at the end of 2017.  Thinking maybe we'll get away in early November and possibly return for Christmas...possibly.

We've now joined the legion of Snowbirds who spend a lot of time researching cross border stuff like cell phone roaming costs, US/CA$ exchange rates etc. etc.  I'll post about some of these later on. Today it's about the huge foreign exchange transaction fees charges by Canadian banks.  A minimum of 2.5% and up to 3% or even 3.5% if you're using a "premium Canadian card"!  I wrote about this way back in 2011.  Canadian Banks - We Love 'Em and Hate 'Em 

Four years ago our research sourced out a suite of cards offered by Chase Canada.  Chase had a number of infinity cards with various benefits and annual fees.  In the end, we applied for and received the Chase Canada Amazon.ca Rewards Visa.  It seemed to meet all the requirements:

• NO Foreign Exchange Transaction Fee
• NO Annual Fee
• 1% cash back on all purchases, 2% for purchases made on Amazon.ca

Sometime over the past couple of years Chase Canada stopped offering cards to new applicants.  The writing was on the wall.   One by one Chase not only stopped offering new cards but actually closed the accounts.  The Amazon.ca Rewards card along the the Marriott Rewards card lasted the longest but notice was eventually sent out that these too would come to an end on March 15, 2018.  Chase withdrew from the Canadian credit card business.  So the search was on.

A Google search with the title of this post leads to some very helpful sites and discussions about various credit card offerings.  It's amazing how many Canadians add comments suggesting that they have a bank issued credit card which does not charge FX transaction fees when in fact they're paying at the very least 2.5% over the actual exchange rate.  Just because it doesn't show as a separate amount doesn't mean the bank is not charging it!

It's Been An Interesting Year

Remembering back to the time TPCI included the Daily Squawk page it's hard to imagine that I haven't posted for over a year.  From the first post, Investing 101, published May 8, 2009 to Okay...I'm outta here, published July 24, 2013, it was a lot of fun!  I was able to enjoy my hobby of writing while applying it to another hobby, investing.  My investing "career" saw me go from a total passive investor, when I blindly threw money at finance guy each RSP season, to an aggressive trader of stocks as I fought my way back after the big crash.

Along the way, I went out of mutual funds, into exchange traded funds and finally into individual stocks.  I had some home runs and some misses but at the end of the day my portfolio doubled in value from the low on November 20, 2008 to March 13, 2012.  Since then my stuff continued to grow at an acceptable rate with very little effort on my part as I gradually moved into low risk investments.  As I said in Who Should(n't) Be In Funds?, there's a time to get the heck out and that time is as retirement approaches.  Anyone planning to retire does not belong in things that can go down by 50% the day after an event half way around the world!  Old guys just may not have time to get it back as I did.

I am now truly The Passive Canadian Investor as I clip coupons with my bond funds and GICs.  Even though I began monthly RIF withdrawals in March of this year my portfolio value continues to climb.  If this keeps up, the money will last forever...is that really possible??

Like the title says, it's been an interesting year.  We began the year with our first extended stay in our new investment home. We refer to the Fountain Hills condo as an investment home because it didn't feel like we were spending money when we bought it.  Rather, it was like we were shifting funds from one investment pool to another, hopefully one with some upside potential.  Our timing was perfect in two ways.  Firstly, we bought in late 2012, near the bottom of the Arizona real estate market.  Secondly, we able to enjoy Arizona during the most brutal Manitoba winter since 1898!  

Okay...I'm outta here

In May I suggested that the time had arrived for me exit...stage left. With my plan to spend at least three months in Arizona this winter I'll be officially "semi-retired". Time to cash 'em in methinks. As is so often the case, as soon as I decide to sell, the bottom falls out, and that's exactly what happened. In June I posted a chart showing what happened to my bank stocks as soon as I placed my sell orders.

Well, the story has a happy ending after all. The TSX in general and the banks in particular rallied this month and I was able to sell all three banks, BMO, RBC & TD at fifty-two week highs. You gotta know that after I sold they continued to go up. What's new? Doesn't matter. I did really well on these three and will not look back. I also sold my Suncor, leaving only a few penny stocks in my trading account. With all the money parked, for now at least, in the Bond Fund I am after all these years truly a Passive Investor. To be honest, it feels good...been sleeping better than ever!

I do plan to hang in here at TPCI and chip in from time-to-time. After all, as a semi-retired boomer, I should have more time to write.

IMPORTANT REMINDER:
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full DISCLAIMER.

As always, Good Luck & Happy Investing!

Spoke Too Soon!

In my May 22 post I mentioned my plan to cash out of individual stocks and move on. At the time, all three of my Canadian banks stocks, BMO, RBC and TD, were very near their fifty-two week highs. My strategy, if you can call it that, is very simple. Figuring that they reached a the high sometime in the past year they'll get there again soon and I'll take that as my exit point. I placed three sell orders, one for each bank stock. Figuring that I'd like to net the fifty-two week high, each sell order was for the previous high plus a few cents to cover brokerage fees. Too easy!

My guess was that I'd be out of these long held stocks within days. Not!  Could I have been more wrong or timed things any worse. No sooner did I decide to sell, my bank stocks and the whole TSX hit the skids. RBC is off 5.47%. BMO and TD not quite so much. I now figure it could take many weeks or even months before they get back into the range of my sell orders. That my friends is why I've decided to get out. Yes, over the long term they do tend to go up, but the crazy volatility is enough to drive one to drink.  Guess I'll be holding for a while yet.  In the meantime,

Good Luck & Happy Investing! 

May be time to cash 'em in...

Looking back, my first investment in an individual stock was in January of 1997 when the Manitoba Telephone System (MBT) went public. The excitement surrounding the IPO enticed many passive investors into opening trading accounts. I cashed a GIC from my perfect GIC ladder for that one. My MTS shares are long gone but my success with that purchase had me hooked. Watching the markets, buying and selling stocks, what a great hobby!

Sometime later I cashed another GIC and added the proceeds to my trading account. This was for a sure thing and I promised my better half that as soon as the stock doubled I'd sell half the shares and put the money back into a GIC where it belonged. Sadly, the double never happened. The successful Phase 2 drug study was followed by a Phase 3 flop. I've never written the story of my Medicure investment, it's just too painful.

Be that as it may, my overall trading account hit a double a few years ago. The total value has been well over the double from time-to-time and I had many a chances to take the double and run. Alas, greed kicked in as I convinced myself to hold for the triple that never arrived. Up & down, down & up but never reaching the triple.

The return on the TSX for the past five years has been a negative 14.33%. Five years ago I bought a GIC that paid 5% annually. Compounded, it's now up 27.62%.  Are you getting the point? Yup, I think the time may have arrived for an orderly sell off of the basket of stocks in my trading account. I don't intend to bail overnight, rather, I'll pick an exit point for each stock with an aim to be divested by year end. I believe that my message in Who Should(n't) Be In Funds?, goes double for individual stocks.

It's an e-World or should I say iWorld...you can't leave home without ???

I think we're a normal couple...at least we hope so. On a recent trip to Arizona we took along one laptop computer, one Netbook computer, one Blackberry Playbook, one Kobo e-reader, two Blackberries and three iPods. That's normal...isn't it? The scary thing about travelling with all this stuff is that if they x-ray our luggage someone might think we're packing bomb components. Imagine what the maze of devices, chargers and cables must look like when x-rayed.

It's a wired world! Or, rearrange the letters and it's a weird world! I think it's both!

With all that stuff you'd figure we'd be maxed out. Not! While away, I got jealous of her Kobo e-reader and had to have one. It weighs about a third as much as the Playbook and the paper white screen is easy on the eyes and can be read comfortably in full sun light. To top it off, Kobo perfected edge lighting with the Kobo Glo and you can also read in the dark. Since our return we've picked up a second Kobo Glo and I'm lovin' it.

We're not done yet. On the wish list are iPhones to replace the Blackberries when our contracts expire and we're pretty convinced that we need at least one iPad. I think we're only couple we know who don't have an iPad. The Apple thing is pretty additive. Sorry Blackberry. You pretty much caught up with Blackberry 10 but as I posted recently we're likely to see iPhone 6, 7 & 8 before we ever see Blackberry 11.

Speaking of Apple (AAPL), their shares are off over 40% since the peak of $705.00 last fall. Seems the market expects a home run every quarter from the greatest innovator ever. Rumours are all about iWatch, an Apple smart watch. I figure Apple just planted that rumour to get everyone else blowing their brains out on smart watch development. Samsung & Google will introduce smart watches and then wake up to the fact that we all quit wearing watches a long time ago.

Have a great weekend & Happy Investing!

Two Of The Best Stocks I Didn't Buy

I've done my share of bragging on these pages. Why not? It's my blog and if I want to share a success story so be it. To keep things in balance I've also shared stories of several mistakes. This is another one of those. Happily, it's not about losing a pile of money, rather, it's the story of two missed opportunities.

Back in March of 2006 Canada's iconic coffee giant Tim Hortons (THI) announced an IPO. The shares, priced at $27.00, went on sale Friday, March 24, 2006. Me, I figured I'd wait and see. I actually thought Tim's had reached a saturation point. It seemed they were running their own competition on many streets in 'Peg City. It was a while later that I visited Vancouver and saw Starbucks operating as many as three stores at an intersection. Over the next few years Tim's shares went up and down but mostly up. They reached the double, double in March of 2012, six years after the IPO. Today they're at $52.65, and no, I never did buy any!

The second missed opportunity was Dollarama (DOL). Many believe that the dollar store sector offers one of the best investment opportunities in the retail sector. While The GAP and Canadian Tire eke out a 2-3% increase in year-to-year same store sales all a dollar store has to do is raise their price to $1.25 and bingo, a 25% increase!

My Dollarama story begins the day I left the house heading for Canadian Tire in search of some connectors and splitters for the entertainment center. You know, the whole deal with the cable box, TV, VCR, DVD, sound system and enough cable and wire to go once around the earth. As I sat at a traffic light I spotted a Dollarama store just past the intersection. I figured I'd check it out. Well, I found most of what I was looking for all priced at a buck or less as a couple of items were packaged in twos. Yup, two for a buck! After spending $4.00 I continued on to Canadian Tire to finish off my shopping list. You gotta know, I did some price checking. One of the items I'd purchased at Dollarama two for a buck was priced at $4.95 for one. From that day on whenever I needed a small hardware bit or household gadget my first stop was Dollarama.

I know, I know, you get what you pay for. One rule of thumb for dollar store shopping is to avoid things with moving parts. A screwdriver, great! A crescent wrench, not so much.

The Dollarama IPO was in October, 2009. The initial share price was $17.50. Why, if I loved Dollarama so much didn't I jump in? I learned that the Quebec dude who invented Dollarama had sold the company some time ago to Bain Capital of Boston. It was Bain who were offering the shares simply to get their money back, not to expand the company. Once again, I figured I'd watch for a bit before making an investment. Dollarama hit the double in less than two years. Today it's at $61.39.

Lesson learned, the next time a Canadian consumer success story goes public jump on for the ride! Canadians love their home grown companies.

Trash Talkin' At Blackberry??

Blackberry (BB) CEO, Thorsten Heins,says Apple stood still and now the iPhone has fallen behind.  Unbelievable! This coming from a guy who heads a company that didn't manage to produce a touch screen smart phone until sixteen months after Apple (AAPL) introduced the iPhone. By then iPhone 2 was already out. As if to lay permanent claim to being sixteen months behind they managed to crank out the half baked PlayBook, without email or calendar, sixteen months after the first iPad. A month later Apple rolled out iPad 2 and crushed Blackberry once again.

Now, with the long delayed Blackberry 10 operating system he thinks he may be a hair ahead and instead of quietly taking care of buisness, he's out there trashing Apple.  It doesn't take a crystal ball to predict that he'll be eating those words in short order.  Let's see, Blackberry 10, January, 2013, just four months after iPhone 5.  My guess, we'll iPhone 6, 7, & 8 before we see Blackberry 11, if Blackberry lasts that long...more to the point, if Thorsten lasts that long.

As an investor I did real well buying and selling Blackberry shares, when it was called RIM, in the $40.00-$50.00 range. Since I bailed the shares have been as low as $6.10. They're $15.43 today. Hey, I'm Canadian and would love to see Blackberry succeed, but trash talking Apple accomplishes nothing!