The best way to transfer money to Canada from the US
As an international business, you’re probably looking for the most efficient and cost-effective way to transfer money. Here we’ll take a look at how you can send money to Canada from the US to pay your employees, suppliers, and vendors in the smoothest way possible.
We’ll help you determine the right method to avoid high foreign exchange (FX) rates and supply chain delays to keep your business running effectively.
Using the SWIFT network
If you choose to use a large retail bank for your international money transfers, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) might be the right method for your business.
The SWIFT payment network works with over 10,000 financial institutions around the world to provide a consistent and reliable method of transferring money. SWIFT will first create a payment order for your transfer. It’s then sent through several financial institutions before arriving at its destination.
Businesses choose SWIFT because they want to continue working with the same bank to maintain their relationship with them. And the process of sending SWIFT payments is quite simple, too.
All you need to do is set up a wire transfer with your US bank and find your relevant Canadian SWIFT code (also known as a Business Identifier Code [BIC]). A BIC is an international standard for identifying a specific bank and its branch to route your transactions.
However, there are a couple drawbacks to SWIFT that you should consider before choosing this method for your transfers to Canada.
You’ll face several fees when making a SWIFT payment. Each bank that your money transfers to on the way to its destination will likely charge a handling fee or a service commission.
Due to the international nature of SWIFT, a set table of fees is difficult to predict. The financial institutions that your transfer passes through are likely different from that of another business. Fortunately, your bank might charge one flat fee to cover the transfer costs. But you’ll have to reach out to your bank and speak with them directly to know for certain.
And since your transfer will involve changing currencies from USD to CAD, there are exchange rates as well. Large retail banks don’t always offer ideal FX rates for SWIFT transactions — they’re often 5% higher than interbank FX rates.
SWIFT payments also aren’t the fastest. They can take up to four business days to clear, which is often frustrating for your business as well as who you’re sending money to. A lengthy wait time could be detrimental to your business if you’re on a tight deadline with vendors and suppliers, and also fuels uncertainty for employees who expect to see payroll money deposited into their accounts on a certain day.
These wait times might also affect the flow of your supply chain. Vendors and suppliers will have to wait for payments to clear before they can send products and services. This creates hurdles in your overall operations.
A lack of transparency is another factor to consider if you opt for transfers through SWIFT.
It’s generally well known that large retail banks aren’t the most clear on the service fees and FX rates that they charge. They’re also not the easiest to understand. And sometimes you won’t know what the exchange rate was or the amount of the service fee until after the transfer was made and you see them on your statement.
Using a money transfer service
Using a money transfer service is another way to send money to Canada from the US.
Western Union and MoneyGram are just a couple examples of businesses that provide money transfer services. They’re specifically designed to help people and businesses send money internationally.
You won’t have to rely on a bank to transfer the money, and a bank account isn’t needed to receive it either. Additionally, transferring money through this type of service is significantly faster and cheaper than going through a bank.
However, individuals sending money abroad to friends and family are the most common users of this service. You should also expect a $50,000 transfer limit, which might create problems down the road as your business grows, expands, and starts to generate more money.
[Related: How to pay globally distributed teams]
Using PayPal or peer-to-peer transfers
Another way to transfer money to Canada from the US is through PayPal or peer-to-peer (P2P) transfer platforms such as Interac. Unfortunately, the most common P2P platforms in the US — including Venmo, Zelle, and Cash App — aren’t available in Canada.
PayPal is a reliable payment platform that millions of people use worldwide. It’s easy to use, has secure technology to protect users from fraud, and has a notable resolution process when it comes to disputes.
However, PayPal Business charges several fees for payments, especially international ones. There are transaction fees, conversion fees, and general fixed fees that reduce the platform’s appeal.
For example, PayPal charges between 1.9% and 3.5% per transaction depending on the amount, plus an additional 1.5% for international transfers. You can typically expect to be charged a 4% fee for international transactions that involve a currency conversion.
Using PayPal also puts your business at risk of account holds, lengthy payment times, declined payments, and canceled payments. This is detrimental to businesses that can’t afford to lose time by dealing with various payment difficulties.
P2P currency transfers
P2P transfers are much faster and less expensive than setting up a transfer through a bank.
However, one risk of using them is that they’re not always safe. There usually isn’t a great security system in place to protect users from fraud and hacking. The exchange rates aren’t ideal either. E-transfers can also grow stale much faster than a check.
Interac, for example, cancels e-transfers after 30 days if they’re not accepted. There are also some other rules that Interac requires its users to follow that might not suit well for certain businesses. You can only send up to:
$3,000 in a 24-hour period
$10,000 in a seven-day period
$30,000 in a 30-day period
Though sending a payment through a P2P platform is incredibly fast, it can take days for those payments to clear in a user’s bank account.
Transfering money through a global business account
The best option to transfer money to Canada from the US is through a global business account.
Opening a global multi-currency account with Airwallex gives you the best benefits compared to the other money transfer methods mentioned above. The ability to transfer money to more than 30 countries at market-beating FX rates (expect only 0.5% above interbank) will help your business manage its operations in the most cost-effective way possible. For example:
Compared to the SWIFT network, Airwallex relies on a network of local bank accounts for transfers. We send your money where it needs to go within one business day, and our global accounts are free to open with zero monthly account fees. You won’t see any “gotcha” charges from us.
Opening a foreign currency account with Airwallex also means you can collect various currencies (essentially wherever you do business) without exchanging them. For example, you can receive payments from your Canadian customers in CAD, hold them in your account, and then transfer them to your Canadian employees when the time is right to avoid double conversion.
Which option is right for your business?
Opening a global business account with Airwallex is the smartest option if you regularly make international transfers to Canada, as well as any other country you do business in.
Cutting the cost of currency conversion fees, as well as eliminating surprising transfer and exchange fees will significantly improve your profit margins. Airwallex also makes it much easier for eCommerce businesses to expand thanks to our various partnerships with other fintech platforms.
Margaret runs partner marketing for Airwallex US, working with great companies across ecommerce, consumer goods, consulting, and tech to deliver excellent experiences to shared audiences.