6 Financial Tips for Snowbirds and Canadians Planning Extended US Travel
There are only two weeks of the year when I don’t find myself cursing winter and the snow that inevitably comes with it; during the two weeks leading up to Christmas, the snowy winter weather just seems to add to the charm of the holiday season. After that, cue the cursing. I spend the rest of my winter days visualizing myself basking in the warmth of the sun on a beach in South Florida or hitting the links on a lush green golf course in Arizona. Whether you’re a snowbird escaping south for the winter or just planning an extended trip to the US this summer, here are some financial tips to help make life easier and save you some money:
Get travel health insurance
Avoid putting your financial future at risk and be sure to purchase travel health insurance for the duration of your stay in the US, before leaving home. Even a short stay in a US hospital can rack up a big bill costing you thousands of dollars, a longer stay can climb into the tens of thousands. Provincial health plans have restrictions on what is covered while travelling outside of Canada and even for items that are covered, coverage generally maxes out around 10% – 20% of the costs. All the major insurance companies offer travel health insurance in some form, so compare both the cost and coverage provided based on your needs and don’t decide solely on price.
Plan the length of your stay in the US to avoid tax implications
Canadians can stay in the US for up to 6 months (183 days) out of a 12 month period before they are considered US residents, are required to file a US tax return and become liable for any taxes owed. The US government’s formula, called the Substantial Presence Test, used to calculate this isn’t straight forward either; it’s measured over a three year period and counts even short overnight cross-border trips throughout the year towards the total. Many snowbirds limit their US winter migrations to 4 – 5 months per year to safely avoid any tax related complications. Details about the Substantial Presence Test can be found here on the IRS website.
Get a US cell phone plan
Roaming charges from your Canadian cell phone company can quickly add up to very large bills if you use their services while in the US. Call your cell service provider and have them add a US roaming package to your account to help keep those roaming charges down. If you’ll be away for more than a month, the more cost effective option will likely be to ditch your Canadian cell phone plan and sign-up with a US cell service provider on a monthly or pay-as-you-go plan; remember to first check that your phone is unlocked and is compatible with the US service provider you have selected. Also, make sure to give your new US number to family, friends and any other contacts who may need to reach you while you’re away.
Set-up e-billing, automate payments and enroll for online banking
Make your life easier by managing your bills and banking electronically while you’re away. First contact all your service providers and set-up e-billing for your monthly bills (e.g. utilities, cell/home phone, credit cards etc…) so that you receive your bills by email and can access them via the internet. Next, ask each provider to set-up pre-authorized debit/credit payments so that your bills are automatically paid via your bank account or credit card on the due date, this also helps eliminate any risk of incurring late charges. Don’t worry about missing the chance to review your bills first, most providers will correct any billing errors if you contact them within 60 days even if you’ve already paid the bill. Finally, enroll in online banking so that you can manage transferring money between accounts and making any one-off payments with a few clicks of the mouse rather than the hassle wasting time and incurring long distance charges trying reach your bank over the phone. If you don’t want to set up pre-authorized payments or if it’s not offered, you can also pre-pay some of your recurring bills to ensure they are paid on time and there are no late fees for forgetting.
Save by using a currency exchange specialist instead of your bank
Consider using the services of a currency exchange specialist to change your Canadian dollars to US dollars instead of your bank; they are just as safe, much cheaper and more convenient to use. Banks generally include a 2.5% or higher fee in the exchange rate they charge you. Using a currency exchange specialist like KnightsbridgeFX.com can get you an exchange rate up to 2% better than your bank, that can add up to a lot of money! Using a currency exchange specialist is easy and requires no changes to your existing banking relationships. In fact, your currency exchange can be done both electronically or conveniently at the bank branch, whichever works best for you. Take a look at our specialized snowbird currency exchange service.
Set-up a US bank account
If you’ll be spending a significant amount of time in the US, consider setting up a US bank account with a cross-border banking plan or even a new account with a US bank. You’ll save a ton by avoiding the foreign transaction fees charged by your Canadian bank for using a US bank’s ATM to withdraw cash and for making debit transactions; at $1.50 or higher per transaction that can quickly add up. You’ll always get charged the additional 2.5% or higher currency exchange fees on top of that when you’re making withdrawals or debit transactions using your Canadian dollar account, so make sure you’re using a US Dollar account and that you’ve used a Canadian currency exchange specialist to save on those fees when exchanging for the dollars deposited in that US dollar account. Another plus to having a US bank account is that if you do use a currency exchange specialist to exchange your dollars, those exchanged funds can be deposited directly to your US bank account for easy access. TD Canada Trust and RBC both offer cross-border banking plans in partnership with their respective US counterparts, TD Bank and RBC Bank. There are also a seemingly endless number of US Bank options, so be sure to do your research and determine which option best suits your needs.