Norbert’s Gambit vs. Smart for Forex Exchanges

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We not too long ago bought a query in our inbox that goes like this:

I’ve used Norbert’s Gambit earlier than to alternate CAD to USD in my Questrade RRSP account. However I additionally examine your latest travels and the way you utilize Smart to transform currencies.

Which has a greater conversion charge in your expertise when changing CAD to USD?

Due to how a lot we journey, we do a LOT of forex exchanges, so it’s vital for us to cut back charges as a lot as we will. And people charges can add up, massive time, should you’re not cautious. In the event you naively use money alternate cubicles at airports to alternate cash, they let you know that they’re charging no commissions however how they really become profitable is within the terrible alternate charge they offer you.

As of the time of this writing, the distinction between the precise alternate charge and the one being supplied by a type of firms that has cubicles on the airport is 5%, and since we accomplish that many conversions backwards and forwards every year, accepting that dangerous alternate charge would value us $60,000 x 5% = $2500 a 12 months! That may purchase a lot of Pad Thai.

So should you’re a frequent forex exchanger like us, it’s actually vital to do it in ways in which value as little as attainable. So with out additional ado, let’s discuss how we pay as little charges as attainable after we convert forex!

Norbert’s Gambit

Norbert’s Gambit is a method that mainly makes use of the inventory market to alternate currencies. Completed appropriately, the charges that you simply pay find yourself being a single commerce fee, so these take advantage of sense for while you’re changing bigger quantities. Norbert’s Gambit is helpful for changing between CAD and USD, and also you want a brokerage account that may maintain each currencies natively. Happily, Questrade, which is the brokerage we personally use and promote within the Funding Workshop, is one in every of these brokerages.

Right here’s the way it works.

Step 1

First, you switch money, both USD or CAD, to your buying and selling account. You wish to do that in a margin account, since it is a deposit that shall be shortly adopted by a withdrawal, and that can have tax penalties should you use a tax-sheltered or tax-advantaged account like an RRSP or TFSA.

Step 2

Subsequent, you utilize your money to purchase an ETF that’s cross-listed on each the Canadian and US inventory alternate. The preferred ETF for doing that is DLR, which is an ETF that does nothing however maintain US {dollars}.

Regardless that DLR is a single ETF, it’s listed underneath two totally different symbols: DLR.U.TO, which is the USD-denominated model, and DLR.TO, which is the CAD-denominated model. As a result of this ETF simply holds money, its worth stays secure day-to-day on the USD-listed model. The CAD-listed model, nonetheless, will get priced to the equal Canadian {dollars}, and since this ETF is so closely traded, the alternate charge that the market comes up with turns into the “actual” alternate charge listed by foreign exchange websites like

If you wish to carry out a CAD -> USD alternate, purchase DLR.TO. If you wish to carry out a USD -> CAD alternate, purchase DLR.U.TO.

Step 3

Subsequent, we carry out a “journal,” which is how we switch our possession of 1 ETF to its cross-listed equal. To do that, we merely open up a chat window in Questrade and ask the shopper assist consultant to provoke a journal of DLR.TO to DLR.U.TO, or vice versa. This course of normally takes 3-4 enterprise days.

Step 4

As soon as your items full their journaling course of, you promote your newly transformed items at regardless of the market worth is within the new forex, and also you withdraw the money into your checking account.

As a result of Questrade solely fees buying and selling commissions on sells reasonably than buys, the one charge you need to pay is a $5 buying and selling fee, plus alternate community charges (sometimes lower than $1).

As a result of this charge is a flat-fee construction, it makes probably the most sense to do that with bigger quantities. In spite of everything, should you solely alternate $100, the $5 will characterize a 5% charge, however should you do it with $1000, $5 is barely 0.5%. So the bigger quantity you may alternate directly (and the less instances you do it), the higher.

Professionals & Cons

Norbert’s Gambit is the method I exploit probably the most due to how versatile it’s. I can alternate money for money in as a lot quantity as I would like, and it’s low cost. It’s the most cost effective methodology for exchanging forex I’m conscious of, so long as you do it a number of instances a 12 months for big ($5,000+) quantities at a time.

Nonetheless, there are two massive drawbacks to Norbert’s Gambit. One is that it solely works between CAD and USD. It is because it requires a secure ETF that’s cross-listed between currencies and a brokerage account that helps holding money in these currencies. I’m not conscious of any solution to do a Norbert’s Gambit between CAD/EUR or USD/EUR. If anybody on the market has figured it out, please drop me a line, I’m all ears.

The second downside is that it takes some time. Transferring money into your Questrade account can take as much as 7 enterprise days for big USD deposits, the journal itself takes 3-4 enterprise days, after which it takes 3-4 enterprise days for the withdrawal again out. In whole, the spherical journey can take nearly 3 weeks, so that you do should plan your exchanges forward of time. You don’t wish to be caught with all of your money within the incorrect forex with a lease test coming due tomorrow.


  • Low-cost: $5 (plus ECN) flat charge
  • Money to money
  • Makes probably the most sense for big, rare exchanges


  • Gradual: Can take as much as 3 weeks to finish
  • Might not make sense for small, frequent exchanges

Foreign exchange Price-Free Credit score Playing cards

The second methodology we use to alternate funds is completed primarily after we’re travelling, and that’s to place our purchases on a no-forex charge bank card.

Bank cards sometimes cost a 3% premium above the alternate charge on overseas forex purchases, however there are some that don’t, and these playing cards will convert purchases made in one other forex on the precise alternate charge, mainly permitting for frictionless spending all around the world wherever bank cards are accepted.

After all, that’s additionally its greatest limitation. It solely works the place bank cards are accepted, and bank cards aren’t as universally accepted all over the world as it’s within the US or Canada. Many nations in Asia and South America want to make use of money, and even in some nations in Europe don’t all the time settle for them. I as soon as tried to pay for my meal in Germany with my bank card and the candy previous German girl behind the money register yelled at me! I don’t get it.

One phrase of warning although: In the event you use bank cards abroad, the point-of-sale machine will ask you whether or not you wish to pay within the overseas forex or your own home forex. All the time ALWAYS choose the choice to pay within the overseas forex. If you choose the house forex possibility, the native financial institution will make up an alternate charge that’s all the time terrible. By selecting to pay within the overseas forex, you may be billed in EUR (or no matter) and the bank card firm will do the conversion for you. That’s what you need.

In America, there are a lot of glorious bank cards that supply 0% overseas alternate charges, however as a Canadian with out an American credit score rating, I don’t have entry to most of them. Not that I’m bitter or something (grumble grumble).

Nonetheless, one of many playing cards I can get is the TD Financial institution First Class Visa card. It is a card I used to be in a position to get as a result of TD is a Canadian financial institution that has US branches, and I used to be in a position to apply for this USD-denominated card utilizing their cross-border banking program. The cardboard has a $89 USD annual charge, however my financial savings from the 0% foreign exchange charge greater than makes up for this.

On the Canadian aspect, there are vanishingly few choices for 0% foreign exchange charge playing cards, however one notable exception is the Scotiabank Passport Visa Infinite card. This card has a $150 annual charge, however should you spend greater than $5000 a 12 months on overseas purchases, this charge pays for itself.

Professionals & Cons


  • Handy
  • Works with many various currencies


  • You want the appropriate bank card
  • Solely works for purchases (Can’t use to pay lease)
  • Solely works the place bank cards are accepted


Typically, credit score simply received’t work and it’s worthwhile to pay for issues the old style means, with a fistful of Japanese yen, or Malaysian ringgit, or Polish złoty. That is the place Smart is available in tremendous useful.

We’re an enormous fan of our Smart card, as we wrote in our evaluation. Not solely does it provide foreign exchange conversions at less expensive charges than money alternate cubicles, you may withdraw up the equal of as much as $350 per 30 days totally free at ATMs all all over the world. With 2 playing cards (one for me and one for FIRECracker), that’s $700 you may withdraw per 30 days, which is normally greater than sufficient money we’d like in any given month.

Smart’s charges are charged as a share of the quantity being transformed, nevertheless it’s a significantly better deal than you’ll get at most banks or foreign exchange cubicles.

For example, in case your attempt to convert USD to AUD, Smart will present you a breakdown of its charges, like so.

The precise alternate charge (on the time of this screenshot) was 1.5308, so the ultimate quantity they quote is the equal of a charge of lower than 0.5%. This share charge stays the identical regardless of how a lot you change, so I are likely to solely convert what I would like as money proper earlier than I withdraw it.

Professionals & Cons


  • Low-cost for big and small transactions
  • Works for a lot of forex pairs


  • Restricted money withdrawal restrict

So there you will have it. That is how FIRECracker and I handle spending a number of currencies all all over the world.

We use Norbert’s Gambit through Questrade to do alternate money between CAD and USD, we use forex-free bank cards to make purchases when travelling, and we use Smart to transform and spend overseas money.

However, we’re all the time on the lookout for new concepts. Does anybody have any cool methods they use to transform foreign currency echange? Let’s hear it within the feedback beneath!

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