Norbert’s Gambit vs. Wise for Currency Exchanges

Wanderer
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We recently got a question in our inbox that goes like this:

I have used Norbert’s Gambit before to exchange CAD to USD in my Questrade RRSP account. But I also read about your recent travels and how you use Wise to convert currencies.

Which has a better conversion rate in your experience when converting CAD to USD?

Because of how much we travel, we do a LOT of currency exchanges, so it’s important for us to reduce fees as much as we can. And those fees can add up, big time, if you’re not careful. If you naively use cash exchange booths at airports to exchange money, they tell you that they’re charging no commissions but how they actually make money is in the awful exchange rate they give you.

As of the time of this writing, the difference between the actual exchange rate and the one being offered by one of those companies that has booths at the airport is 5%, and since we do so many conversions back and forth each year, accepting that bad exchange rate would cost us $60,000 x 5% = $2500 a year! That can buy a lot of Pad Thai.

So if you’re a frequent currency exchanger like us, it’s really important to do it in ways that cost as little as possible. So without further ado, let’s talk about how we pay as little fees as possible when we convert currency!

Norbert’s Gambit

Norbert’s Gambit is a technique that basically uses the stock market to exchange currencies. Done correctly, the fees that you pay end up being a single trade commission, so these make the most sense for when you’re converting larger amounts. Norbert’s Gambit is useful for converting between CAD and USD, and you need a brokerage account that can hold both currencies natively. Fortunately, Questrade, which is the brokerage we personally use and promote in the Investment Workshop, is one of these brokerages.

Here’s how it works.

Step 1

First, you transfer cash, either USD or CAD, to your trading account. You want to do this in a margin account, since this is a deposit that will be shortly followed by a withdrawal, and that will have tax consequences if you use a tax-sheltered or tax-advantaged account like an RRSP or TFSA.

Step 2

Next, you use your cash to buy an ETF that’s cross-listed on both the Canadian and US stock exchange. The most popular ETF for doing this is DLR, which is an ETF that does nothing but hold US dollars.

Even though DLR is a single ETF, it’s listed under two different symbols: DLR.U.TO, which is the USD-denominated version, and DLR.TO, which is the CAD-denominated version. Because this ETF just holds cash, its value remains stable day-to-day on the USD-listed version. The CAD-listed version, however, gets priced to the equivalent Canadian dollars, and because this ETF is so heavily traded, the exchange rate that the market comes up with becomes the “real” exchange rate listed by forex sites like XE.com.

If you want to perform a CAD -> USD exchange, buy DLR.TO. If you want to perform a USD -> CAD exchange, buy DLR.U.TO.

Step 3

Next, we perform a “journal,” which is how we transfer our ownership of one ETF to its cross-listed equivalent. To do this, we simply open up a chat window in Questrade and ask the customer support representative to initiate a journal of DLR.TO to DLR.U.TO, or vice versa. This process usually takes 3-4 business days.

Step 4

Once your units complete their journaling process, you sell your newly converted units at whatever the market price is in the new currency, and you withdraw the cash into your bank account.

Because Questrade only charges trading commissions on sells rather than buys, the only fee you have to pay is a $5 trading commission, plus exchange network fees (typically less than $1).

Because this fee is a flat-fee structure, it makes the most sense to do this with larger amounts. After all, if you only exchange $100, the $5 will represent a 5% fee, but if you do it with $1000, $5 is only 0.5%. So the larger amount you can exchange at once (and the fewer times you do it), the better.

Pros & Cons

Norbert’s Gambit is the technique I use the most because of how flexible it is. I can exchange cash for cash in as much volume as I want, and it’s cheap. It’s the cheapest method for exchanging currency I’m aware of, as long as you do it a few times a year for large ($5,000+) amounts at a time.

However, there are two big drawbacks to Norbert’s Gambit. One is that it only works between CAD and USD. This is because it requires a stable ETF that’s cross-listed between currencies and a brokerage account that supports holding cash in those currencies. I’m not aware of any way to do a Norbert’s Gambit between CAD/EUR or USD/EUR. If anyone out there has figured it out, please drop me a line, I am all ears.

The second drawback is that it takes a while. Transferring cash into your Questrade account can take up to 7 business days for large USD deposits, the journal itself takes 3-4 business days, and then it takes 3-4 business days for the withdrawal back out. In total, the round trip can take almost 3 weeks, so you do have to plan your exchanges ahead of time. You don’t want to be caught with all your cash in the wrong currency with a rent check coming due tomorrow.

Pros:

  • Cheap: $5 (plus ECN) flat fee
  • Cash to cash
  • Makes the most sense for large, infrequent exchanges

Cons:

  • Slow: Can take up to 3 weeks to complete
  • May not make sense for small, frequent exchanges

Forex Fee-Free Credit Cards

The second method we use to exchange funds is done primarily when we’re travelling, and that is to put our purchases on a no-forex fee credit card.

Credit cards typically charge a 3% premium above the exchange rate on foreign currency purchases, but there are some that don’t, and these cards will convert purchases made in another currency at the actual XE.com exchange rate, basically allowing for frictionless spending all over the world wherever credit cards are accepted.

Of course, that’s also its biggest limitation. It only works where credit cards are accepted, and credit cards aren’t as universally accepted around the world as it is in the US or Canada. Many countries in Asia and South America prefer to use cash, and even in some countries in Europe don’t always accept them. I once tried to pay for my meal in Germany with my credit card and the sweet old German lady behind the cash register yelled at me! I don’t get it.

One word of caution though: If you use credit cards overseas, the point-of-sale machine will ask you whether you want to pay in the foreign currency or your home currency. Always ALWAYS select the option to pay in the foreign currency. If you select the home currency option, the local bank will make up an exchange rate that’s always awful. By picking to pay in the foreign currency, you will be billed in EUR (or whatever) and the credit card company will do the conversion for you. That’s what you want.

In America, there are many excellent credit cards that offer 0% foreign exchange fees, but as a Canadian without an American credit score, I don’t have access to most of them. Not that I’m bitter or anything (grumble grumble).

However, one of the cards I can get is the TD Bank First Class Visa card. This is a card I was able to get because TD is a Canadian bank that has US branches, and I was able to apply for this USD-denominated card using their cross-border banking program. The card has a $89 USD annual fee, but my savings from the 0% forex fee more than makes up for this.

On the Canadian side, there are vanishingly few options for 0% forex fee cards, but one notable exception is the Scotiabank Passport Visa Infinite card. This card has a $150 annual fee, but if you spend more than $5000 a year on foreign purchases, this fee pays for itself.

Pros & Cons

Pros:

  • Convenient
  • Works with many different currencies

Cons:

  • You need the right credit card
  • Only works for purchases (Can’t use to pay rent)
  • Only works where credit cards are accepted

Wise

Sometimes, credit just won’t work and you need to pay for things the old-fashioned way, with a fistful of Japanese yen, or Malaysian ringgit, or Polish złoty. This is where Wise comes in super handy.

We’re a huge fan of our Wise card, as we wrote in our review. Not only does it offer forex conversions at much cheaper rates than cash exchange booths, you can withdraw up the equivalent of up to $350 per month for free at ATMs all around the world. With 2 cards (one for me and one for FIRECracker), that’s $700 you can withdraw per month, which is usually more than enough cash we need in any given month.

Wise’s fees are charged as a percentage of the amount being converted, but it’s a much better deal than you’ll get at most banks or forex booths.

As an example, if your try to convert USD to AUD, Wise will show you a breakdown of its fees, like so.

The actual exchange rate (at the time of this screenshot) was 1.5308, so the final amount they quote is the equivalent of a fee of less than 0.5%. This percentage fee stays the same no matter how much you convert, so I tend to only convert what I need as cash right before I withdraw it.

Pros & Cons

Pros:

  • Cheap for large and small transactions
  • Works for many currency pairs

Cons:

  • Limited cash withdrawal limit

Conclusion

So there you have it. This is how FIRECracker and I manage spending multiple currencies all around the world.

We use Norbert’s Gambit via Questrade to do exchange cash between CAD and USD, we use forex-free credit cards to make purchases when travelling, and we use Wise to convert and spend foreign cash.

But, we’re always looking for new ideas. Does anyone have any cool techniques they use to convert foreign currencies? Let’s hear it in the comments below!


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48 thoughts on “Norbert’s Gambit vs. Wise for Currency Exchanges”

    1. TD Bank (which is TD Canada Trust’s US division) offers a checking account that does this and that Canadians can open, but there’s a fairly hefty $2500 USD minimum balance requirement to make the $25 monthly fees go away, so it’s not for everyone.

  1. I was just messaging nomad numbers about Wise the other day. I didn’t realize the withdrawal amount is so low. I wanted to stock up on Japanese Yen right now, but I can’t even stock up that much since the withdrawal limit is $200 usd per month. Yeaaa…they said it’s better to withdraw using Schwab debit card.

  2. I never thought i’d say this about a bank, but every day i thank Schwab. Call me a spoiled Yank, but ANY atm in the world will give me cash at the existing rate…and ALL service fees are refunded. But wifey always uses the machines with the cheapest fees for some reason..she is very thrifty.

  3. Wise, at least in the UK and Europe, has an investing feature.
    https://wise.com/gb/blog/hello-assets-invest-with-50-currencies-spend-it-anytime

    You have your cash in various currencies and each of them can be set to be invested in a global index tracker.
    You can pay with your debit card, wise picks the native currency or cheapest conversion for you, and then sells the index fund units the next end of trading day.

    Yes you have the volatility of the stockmarket. But it’s the closest thing I have seen for FI people wanting to do drawdown and use different currencies without holding the actual cash (which gets eaten with inflation).

  4. Quite a few Europeans use Revolut. In a way similar to Wise. Used to be live exchange rate apploed as and when you make a purchase or withdrawal. Believe they charge tiny commission now. Still, very convenient.

  5. I find the best is Brim WorldElite Mastercard for CAD. It’s a no foreign transaction fee card, with 2% cashback (accepted at Costco Canada).

    Here’s a link to apply:

    https://brimfinancial.com/?code=76015

    It uses a referral code where I get $20 if 5 of you apply and get it.

    It comes with nice insurance, too, such as up-to $2,500 hotel burglary, lost baggage, cancelled flights, rentacar, cellphone damage up to $1,500 etc.

    If you get it make sure you use the travel notice feature otherwise they decline in a foreign country, but it’s 2 clicks to set up a travel date, all online no calls.

    1. Brim just changed their policy – 1.5% fee added and a change (for the worse) for their cashback rate. Comes into effect in May. Brim was our go-to and we are currently travelling and using it exclusively 🙁

  6. For accessing cash with the Wise card, are you able to find $0 fee ATMs? I have Revolut (which operates very similarly to Wise) but I couldn’t find in-network ATMs when I went to withdraw cash from ATMs in Italy, Spain, Australia, and New Zealand. Had to pay a $5 ‘convenience’ fee to the owner of the ATM. That was disappointing. [Most interesting, the fee was lowest in grocery stores and post offices.]

  7. For Canadians: I have held a Home Trust Preferred Visa Credit Card for years now and have used it extensively across the US and for overseas purchases in foreign currencies. No annual fee and no FOREX fee.

    1. This is what we do too. HomeTrust is a great option. In addition to travel expenses we use it for online purchases on US and European sites to save the conversion fees.

  8. HI Wanderer, I have been following your blog from long time & Now started actively trading in stock market from Canada. I need help. If you know any stock brokerage in USA or Canada which will let me have institutional account to trade before or after hours? in both countries? also tax implication if primarily trading in us exchanges?

    1. Questrade offers corporate accounts, but I don’t think they do institutional accounts. The only brokerage I’ve personally seen offer this is Interactive Brokers, so check them out.

  9. @Uros. From what I understand, it seems that Brim changed they stance on no FOREX fee and just recently started charging 1.5%. I was about to apply for one when I found out this past February, so I cancelled my application. Also, on Reddit many people seem not to be very happy with Brim Too bad.

    @Andrew. I also have Home Trust Preferred Visa Credit Card that I got years ago (actually thanks to Wanderer’s recommendation on this blog:), and can confirm that it still does not charge annual fee and FOREX fee. So that’s what I currently use when abroad. I’m not sure why Wanderer is not recommending it any longer.

    1. I still have the Home Trust card, but last I heard people were reporting that they were having trouble processing new applications so I’ve been a little hesitant in sending more people their way. But once you get the card, it does offer no-forex fee conversions from CAD.

  10. Couple of travel CCs that I use that charge No foreign transaction fees are United Chase Mileage Plus visa, and Citi Costco Visa cards. There’s a $ 60 annual fee for the former, and the latter comes with paid Costco membership (absolutely worth it). So a travel CC along with a Wise card (for ATM withdrawals in foreign currency) will be good for international travel.

  11. @Simon, you are absolutely right, they have indeed changed to 1.5 forex fee, which I had no idea happened.

    Checking some forex transactions from January 2024 I see they have NOT charged me forex exchange fee, but their website does state 1.5% fee as of today.

    That’s too bad, they were great while it lasted..

  12. @Wanderer please remove my Brim credit card post from above, wouldn’t want to mislead people. Thanks

  13. Wealthsimple Cash debit Mastercard is a zero-FX fee card. It can be used for ATM withdrawals in 145 countries, zero-ATM fees from Wealthsimple. Money in the Cash account earns 4-5% interest depending on total investment with Wealthsimple. 1% reward as cash, crypto or stock, automatically reinvested if you so wish.

    If enough money is not there in the Cash account, Wealthsimple will sell required stocks from the non-registered account.

      1. I wouldn’t withdraw cash with it unless absolutely necessary. Use it on point of sake terminals instead and for online purchases. If cash is absolutely necessary, withdraw cash once in a large amount and run the cash for as long as you can.

      2. ATM withdrawal limit is $500 CAD per transaction and $1,000 CAD per day. Spending limit at POS is $5,000 CAD per day. No additional monthly cap for either.

        The card has been tested in Australia, Bangladesh, Belgium, France, Germany, India [zero ATM fees], Japan [zero ATM fees], Mexico, Netherlands, Portugal, Qatar, South Korea, Taiwan, UAE, UK, USA, among others. There are many Reddit threads about it; here is one: https://www.reddit.com/r/Wealthsimple/comments/16z76b6/tested_wealthsimple_cash_card_actually_has_a_0_fx/

        If the information provided has been helpful, please feel free to use my referral code QNUCHW to open a Wealthsimple account and fund it in 30 days [you and I will each get a bonus of CAD 25 from Wealthsimple, with the amount being 10x for net funding of CAD 100,000].

    1. Just set it up myself last week with the Wealthsimple Cash card and will use it via Apple Pay on next purchase. Really sad that HSBC got bought by RBC. Their HSBC World Elite Mastercard was amazing and yet, RBC is not keeping any of the RBC products.

      I do have the Scotiabank Passport Visa. If the Home Trust Visa is still available and Wealthsimple Cash Card, I might close the Scotiabank card and use Wealthsimple as my primary card and Home Trust as the backup (backup as it offers zero rewards on purchases made in Canada.

  14. Question re the NG route – how do you physically withdraw the USD from your Questrade non-reg account after you perform NG? So for example, deposit $1,000 CAD, go through the whole journaling process, and now you have $700 USD in your non-reg account after the conversion. How do you then sell/withdraw that $700 USD and get the USD into your Canadian bank/chequing account? ie When you sell it does it automatically appear as USD in your chequing account? / Do you have to have a Canadian USD chequing account linked to deposit it into? / Does it not try to convert that USD sale back to CAD if your chequing account is in CAD? Trying to wrap my head around that part and hopefully the question is clear. Thanks!

  15. Excellent post! We’re big fans of Wise and I personally frequently use it to transfer money between my US (USD) and French (EUR) accounts when EUR/USD swing significantly, taking advantage of currency exchange fluctuations. However, do you know if Mrs. NN can do the same with only US bank accounts for now? Is there an equivalent of a EUR fund she could invest in to mirror the EUR currency rate and utilize it similarly?

    Thanks!

  16. you can use Interactive Brokers Canada to do currency exchange for $1 commission from CAD to USD or the other way around at market rates same as xe.com, dont need to over complicate it with Norbert’s Gambit and wait a few days, the exchange is instant but you need to have minimum of 10K with IB that can be invested and enough cash to cover conversion

    1. That’s a great tip. I will investigate. For $1 fee, low complication, that’s worth it if the only fee. I’ll need to understand how you can get the USD cash into your hand from IB.

  17. Hey Wanderer, thanks for the write-up!

    One thing investors need to keep in mind if you’re performing the Gambit in a non-registered account, is that during the 3 days when it takes the trade to settle, the currency exchange rate may change slightly. This could result in either a loss or a gain that will need to be reported to the CRA at tax time: https://canadiancouchpotato.com/2015/02/26/taxable-consequences-of-norberts-gambit/

    Regarding performing the Gambit in tax-sheltered accounts, many DIY investors opt to do it in their RRSP because it removes the 15% withholding tax on dividends that you would otherwise pay on Canadian-listed US ETFS (i.e., if you hold VUN in your RRSP your dividends are automatically subject to a 15% withholding tax, but if you hold VTI in your RRSP you will get the full dividend without the 15% taxation).

    BTW, I have been using the Scotiabank Passport Visa for years and can confirm it is a great card for travel. The points more than cancel out the annual fee!

    Cheers!

    1. That’s a great point. Admittedly, my T5008 that I have to report to the CRA each year does have quite a few Norbert’s transactions in it, but the amounts are pretty small since I hold it for such a short period of time.

  18. i avoid Norberts .. . if i see a deal i want to do , I want immediate US funds so i convert within Questrade .. time can be off the essence

    Wise is great .. recent countries we went to Morocco and Tunisia .. cash is king
    simply use the Wise card at ATM

  19. For ATM cash withdrawals I mostly use Wise when travelling. For any place that accepts credit cards-restaurants, groceries etc.- Scotia Passport Visa, outside and inside Canada. The $150 fee sounds annoying until you start using rewards – you get 3 points for 1$ spent in grocery stores and we spend cca $1000/mo for groceries. All plane tickets purchased with this card too. You can redeem points – “for travel” seems best- and I got cca $300 cash back last year that covered plenty the $150 fee. And it comes with 25 days travel insurance -and other insurance -purchase, rental car collision etc- that I actually used this year to get back medical expenses in Mexico -they move very slow to reimburse medical but they do.

  20. For the Norbert’s gambit, TDB2915-that has USD and CAD versions similar to DLR-worked fine for me. You need a TD self-directed account, and the round trip takes cca 4 days. There is no need to talk to an operator, all is web based. Because of the long 4 days round trip – that is a lot less than the 3 weeks with Questrade- I can’t say this is my favorite though. Coming to Canada from Romania where after 1990 they strive to shed old communist bureaucracy, my tolerance for it is rather low.
    BTW Some cities in Canada have an exchange service that is a bit better than wise and has higher withdrawal limits – google and ask around.

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