So, I feel the pain of folks here. It took quite some time and experimenting to figure this out but here is a solution that works for us. We learned this after my spouse started online tutoring at the start of the pandemic (yup, she was laid off). The dilemma was she was that she was being paid by the teaching platforms in USD and was losing a small fortune to fees and unfavorable currency conversion rates in addition to the commission taken by the teaching platform. Here are some of the steps and lessons learned to overcome this:
Lesson 1: You can no longer create a US PayPal account without a US Address. You could do this at the start up of PayPal as my friend found out he was being dinged with exchange fees for all his Canadian Transactions. From CAD to USD back to CAD. Turns out when he call support, they told him it was a US account. So they set up a Canadian Account and linked both. Call it being Grandfathered in. So unless you have a nice little condo in Florida, assume you will be creating a Canadian PayPal account.
Lesson 2: If your interest is currency exchange do NOT use banks. Also, using PayPal for currency exchange, while convenient for some thing, will cost you almost as much as the banks. There are far better options for currency exchange. Check out Monito for options. We created accounts in many of the top rated services and tested them. All work well, however, for the best rates (and more money in our pockets) we landed on Transferwise for smaller transfer amounts and OFX for larger amounts as our exchange agents of choice. As OFX is a foreign exchange approach, transfers take a little longer as they actually exchange your money on the currency markets. Transferwise and those like it have a very different and innovative approach that allows them to offer very cheap exchanges and get the money to you very quickly.
Lesson 3: Set up a US Bank Account using the subsidiary of a Canadian Bank. It costs you nothing to do this and doesn't require a US address. Many top Canadian Banks are now offering US Accounts for Snowbirds, Cross Border Shoppers, etc. These accounts are IN the US... not Canadian accounts holding US Dollars. As our Canadian bank is RBC Royal Bank, we went with their option, RBC Bank, located in Georgia I believe. This also come with a Visa debit card which is useful when you are shopping in the US.
Lesson 4: Once you have your account set up, you need to link your PayPal account to it (if you really feel you need to use PayPal... remember, there are alternatives depending). Forget about your existing PayPal Account that is already connected to your Canadian accounts. We had no luck at all linking the US account to this. Start Fresh. First create a new email account and brand new PayPal Account. Before you do anything else, link your US Bank to it (seem to recall only setting up a USD balance also... no CAD... but can't remember that step. Works like a charm. We haven't connected anything else to this PayPal Account as, like I mentioned, we use other means for currency exchange. So, you should now be able to move US funds to and from your PayPal account. If you get paid in USD, collect it here.
Lesson 5: Once you have your USD account, you can connect it directly to all your other pay, transfer and exchange services. We also use Payoneer. This and Transferwise (maybe others) actually provide you with accounts in multiple currencies and provide you with Bank Account credentials for the country you are operating it (e.g. Routing Number and Account Number in US, Bank/Transit/Account for Canadian balances). Funds sit with the company but you can access them like it is a bank account. Sadly, without a mobile phone address in the US, we can't use person to person services like Venmo which seem to be taking off in the US for small transactions.
Lesson 6: Make SURE you use the EXACT same name for all your accounts. ANY variation in this will break it. So if your bank account says John Doe, your PayPal account should not use I.M. John Doe. Setting up new accounts from the start helps avoid this. Of course this should be the name that is on your Canadian bank account as the Bank will require this.
Lesson 7: Set up a US Chequing Account not a savings account. Any interest bearing account, no matter how small your return, will require you to connect with the US IRS. I thought Canadian regulatory forms were bad! As the exchange has been rather bad of late, we've been holding funds in the US to see if markets turn around. While sitting there, we figured why not be earning interest and set up a Premium Money Market savings account. When we started filling in the forms, we decided to cancel the account the next day. I think the other option was to not fill the form and after a time, we would have been considered a "Non resident Alien" for Tax purposes and IRS would require the bank to withhold 30% in taxes. As we are approaching retirement, I didn't want anything like this to affect our potential for "Snowbird" status 🙂
Hope this helps!
Zeke
