Foreign Exchange Fee

A foreign exchange fee (also called an FX fee or currency conversion fee) is the markup your brokerage charges when you convert money between Canadian and U.S. dollars. This comes into play whenever you buy a U.S.-listed stock or ETF using Canadian dollars, or when you receive U.S. dividends that get converted back to CAD.

How much it costs

Most Canadian brokerages charge between 1% and 2.5% on currency conversions, built into the exchange rate they give you. You won’t see it listed as a separate line item. Instead, you’ll just get a slightly worse rate than the real market exchange rate.

On a $5,000 conversion, a 1.5% fee means you’re paying $75. On $20,000, that’s $300. It adds up fast, especially if you’re making multiple trades in U.S. dollars throughout the year.

How to reduce it

Some brokerages offer USD accounts, which let you hold U.S. dollars directly. This way, you only convert once instead of every time you buy or sell a U.S. stock.

Another popular approach is Norbert’s Gambit, a technique where you convert currencies by buying and selling a dual-listed security. This can reduce your conversion cost to just the price of a couple of trades.

Why it matters

If you invest in U.S. stocks or U.S.-listed ETFs, foreign exchange fees are one of the hidden costs that can eat into your returns. Knowing what your brokerage charges and whether there are cheaper alternatives can save you hundreds or even thousands of dollars over time.