Canada and the United States share a common language and culture and have enjoyed a close and prosperous business relationship on top of that. In fact, Canada offers an open market for US goods and services, and Canadians spend 60% of their disposable income on US goods. Trade between the two countries amounts to $ 2 billion a day, making the United States and Canada each other’s most important bilateral trading partners.
Despite the goodwill and boom in trade, the two sovereign nations also share a common border. However, they do not share a common currency and financial transactions between the two countries are subject to specific regulations.
If you are currently doing business with Canadians or are considering the idea, the following information will help you successfully accept payments from our northern neighbors.
How to accept Canadian payments
Wire transfers are one of the safest and fastest ways to receive payments from Canadian customers. In order for the transfer to be executed quickly and accurately, your customer will need to ensure that their bank in Canada has the following information:
- The name and address of your company
- ABA number or SWIFT code
- Your account number
Once your client has this information, they can send the funds to you in the United States without a problem. Your customer must go to their bank and request the transfer in person as many banks do not allow transfers over the phone.
The only downside to a wire transfer is your customer’s fees. Depending on their relationship with their bank, these may include shipping and receiving charges and the current exchange rate for converting CDs to USD.
Automated Clearing House (ACH) is a network used to transfer funds between banks in the United States electronically. The National Automated Clearing House Association (NACHA) oversees its operation and is also known as the ACH Network.
This organization is mentioned here because ACH payment processing is popular in the United States. Many merchants mistakenly believe that their Canadian customers can use ACH to transfer funds from Canadian banks to the United States electronically. It’s not correct. ACH only performs bank-to-bank transfers in the United States. Canada uses other methods of electronic funds transfer (EFT). Canada is currently in the process of modernizing its EFT system through the Payments Modernization Initiative to make it compatible with more advanced ACH technology.
The easiest way for your client to get around this hurdle is to open an account with RBC Bank USA or TD Bank North and transfer funds to their respective branches in the United States.
The number of companies accepting crypto continues to grow. The total is well over 100,000 and includes Starbucks, Amazon, Burger King, KFC, and others. These currencies are becoming more and more common, and because of their international use, your Canadian customers may use them to pay you for the goods and services you provide.
There are both advantages and disadvantages of accepting coins and other currencies as a means of payment. One of the advantages is the presence of new potential customers: young and urban buyers are using e-money to pay for their purchases at an increasingly rapid rate.
Some of the risks involved in accepting these payments include high volatility. Prices fluctuate quickly and regularly, and you may not receive the same amount as the payment you received from your Canadian customer at the time of purchase.
Taxes are another consideration that a merchant should take into account. The IRS requires a business to report the value of cyber currency when the customer has delivered it. If it gains or loses value, the business must report it as a gain or loss.
Accept credit card payments from Canadian customers
Your credit card processor can process transactions with your Canadian customers as long as the cards they use display one of the major credit card brands like Visa, MC, Discover, etc. However, there are other marks used in Canada, and if you plan to trade a lot across the border, you may want to add these marks to your. merchant account.
One caveat you should know is that if you choose the option of having the transaction authorized in USD and paid for in USD, and your customer pays their credit card company in CD, you will pay a higher fee for the transaction, and the brand of the card will charge a “cross-border” fee.
How to accept Canadian payments online
Canada is the world leader in cross-border e-commerce and accounts for 75% of online retail transactions. Most of these purchases are credit card transactions, so making sure that your payment provider understands international transactions is a must. PayPal consistently ranks among these providers for its security and transparent operation.
You can also set up your website with a mobile payment app. It is estimated that over 31 million Canadians use smartphones and entering a credit card number on a mobile device is now standard procedure.
How to convert Canadian dollars to US dollars with minimal fees
Typical fees or exchange rates charged by Canadian banks to convert CD to USD are on average 1.35%. However, there are ways to minimize exchange rates when converting dollars from both countries.
Instead of using a conventional bank, try going to a FOREX broker. These companies are currency exchange experts and are usually able to offer the cheapest rates.
If you can accept the conversion into credit instead of USD, the cheapest way would be to use a credit card with no currency exchange fees – you’ll only pay the rate the bank itself pays.
Tapping into Canadian markets can be very lucrative for US businesses. Maximizing profits is on the minds of every business owner and one of the places where costs can be reduced is in the currency trading process. Having an understanding of the industry and the different options available can prove to be a cost-cutting measure used for day-to-day transactions.