Where to hold U.S. cash

By on April 14, 2017


A good U.S. dollar money market fund may offer a better return. (ShutterStock)
A good U.S. dollar money market fund may offer a better return. (ShutterStock)

In my newsletters, I have previously recommended holding cash reserves in U.S. dollars. Some readers have asked me what particular vehicles I would recommend to hold this cash (such as money market funds, savings accounts, etc.) and whether it still makes sense to do so.

Unfortunately, you aren’t going to earn much interest on U.S. cash (or on any cash for that matter). My recommendation was based on my expectation that the loonie will decline in value against the greenback this year, which would give you a capital gain on any U.S. cash you hold. (Of course, if the loonie rises, you’ll lose.)

All the big banks offer U.S. dollar accounts, and some come with a variety of bells and whistles, such as a U.S. currency credit card, cheques, favourable exchange rates, etc. What they don’t offer is respectable interest rates. For example, you would have to deposit at least US$25,000 with TD Bank in order to earn a miserly 0.10%. If you have over US$100,000 you can earn 0.25% with HSBC.

A good U.S. dollar money market fund may offer a better return. For instance, the CIBC U.S. Dollar Money Market Fund returned 0.7% over the year to Feb. 28. The average for the category over that time was 0.3%.

You can find better rates with some smaller U.S. banks; however, they may require a U.S. address. You can search for details at www.bankrate.com/partners/sem/savings-accounts-mma-v3.

Courtesy Fundata Canada Inc. © 2017. Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, available through his BuildingWealth.ca website. This article is not intended as personalized advice.