Is a U.S.-dollar credit card worth it?

Canadian consumers mulling the merits of a U.S.-dollar credit card need to do the math.

With the loonie valued higher than the greenback, consumers with a U.S. card are losing money on the exchange rate. But they also avoid the banks’ administration charge, typically 2.5 per cent of the amount of cash converted to U.S. dollars.

After factoring in the conversion charge and exchange, it may actually be cheaper these days to use a Canadian-dollar card for U.S. purchases, said Ben Woolsey, the marketing director of research firm creditcards.com.

Still, he said a U.S.-dollar card issued by a Canadian bank takes the worry out of exchange-rate fluctuations. He called it a niche product well-suited to individuals or small-business owners who want to avoid having their purchases immediately converted into Canadian dollars, and who want statements, interest charges and fees in U.S. currency.

With U.S.-dollar credit card transactions (both purchases and payments) conducted in U.S. currency, Chris Keeley, co-founder of creditcardscanada.ca, cautioned that paying off a balance in Canadian dollars would trigger the conversion charge.

The best way around the fee, he said, is to use the “correct” currency to pay off amounts owing for each type of card.

And since the cards impose comparatively high annual interest rates, he stressed that consumers should avoid carrying unpaid balances.

Still, for those who frequently travel to the states, live in the U.S. more than three months of the year, maintain a U.S.-dollar account, operate a small business stateside, or possess dual citizenship, an American card may make sense.

Primarily, there’s the convenience of being able to pay bills and purchase goods and services, even stocks, with U.S. funds and without currency conversion charges. Holders can also load up the card with U.S. dollars at a time when the exchange rate is favourable.

Obtaining a U.S. card from a Canadian bank where you have an account may also allow consumers to negotiate exchange rates and fees lower than those posted, Woolsey added.

Cards issued by Canada’s big banks offer standard features, with a few subtle differences.

CIBC U.S. dollar VISA provides a monthly statement in U.S. dollars, commission-free travellers’ cheques, accident insurance, car rental discounts, and cash advances of up to $1,000 (U.S.), emergency card replacement and worldwide VISA acceptance.

• Annual fee (at Jan. 26): $35

• Annual interest rate (purchases):19.99 per cent

•  Minimum $1,000 credit limit

•  Three free additional cards

Royal Bank’s Visa Gold also offers U.S.-dollar statements, emergency travel assistance and insurance coverage, as well guaranteed hotel reservations and automatic enrolment in the RBC rewards program.

• Annual interest rate: 19.99 per cent

• Annual Fee: $65

• Additional card fee: $30

BMO U.S. dollar MasterCard provides emergency cash, roadside help, as well as identity theft prevention and assistance. The annual fee for the subsequent year will be rebated if at least $1,000 is charged to the card over the previous 12 months.

• Annual fee: $25

• Annual interest rate (purchases): 19.5 per cent

BMO Mosaik U.S. Dollar card offers standard features including a 19-day interest grace period. It carries a comparatively low interest rate but has a steep annual fee and tougher credit history requirements. There’s also a 1 per cent cash back option on purchases.

• Annual fee (primary card): $74

• Annual fee (extra cards): $5

• Annual interest rate (purchases): 11.40 per cent

TD U.S. dollar Visa has standard features including car rental discounts, purchase security and extended warranty protection, as well as delayed and lost baggage insurance.

• Annual fee: $39

• Annual interest rate (purchases): 19.99 per cent

•  Up to three free additional cards