I went to the bank last week Thursday to convert $300 USD into Canadian dollars. I was flabbergasted to discover I would receive $293 CDN in exchange for $300 USD. I told the bank teller that I’ll wait for the markets to open in the morning before trying to covert the money again.
So, just moments ago, I went to transfer $200 USD from my PayPal account to my Canadian chequing account. PayPal showed me that I would get $195 CDN for my $200 USD. WTF?
For the first time in 10-years since I started selling products online, it is now unprofitable for me as a Canadian merchant to sell online in American dollars.
Not since I was 2-years old has the Canadian dollar reached parity with the American dollar (meaning $1 CDN for $1 USD). When the Canadian dollar was at one of its lowest points 6-years ago, it would cost me $1.75 CDN for just one American dollar. Fast forward years later and now, it is costing me $0.97 CDN to buy one American dollar.
This is great when I travel because I actually earn money when I stay at a hotel or eat in a restaurant. However, I now have to start thinking about my online sales. If I lose 3-cents on every dollar whenever I convert American to Canadian dollars, this will impact my standard of living.
What’s an online merchant to do? If you’re an online Canadian merchant who charges in US funds, how are you handling this? Panicking yet or are you riding the wave?
Virtually every major credit card transaction center online should do the currency conversion automatically – if I send you a bill via PayPal in USD, if you pay in CDN, it should autoconvert, and not necessarily at the most optimal rate.
The US market is in for a period of prolonged weakness, caused by the credit bubble and housing bubble in the US under the latter years of Greenspan’s tenure. While it might be too late to salvage current contracts, you may well want to begin all new billing in CDN until markets stabilize in a couple of years.
Tip: the weakness in the markets – loan defaults – have another 18 – 24 months to run their course as adjustable rate mortgages in the US issued in 2004 – 2006 continue to reset. The last wave should reset in 2009, and most of the bad credit flushed out of the market. Until then, it’s going to be a real rough ride for the US economy.
Leesa, this is also an issue for any of us who do business in the U.S. Most of my clients are there. My projects with them now have a price difference of at least 10% because of the plunging U.S. dollar. We have to be very careful when making commitments to sell products or provide services to clients in the U.S. For so many years, getting paid in U.S. dollars translated into a premium. Now it’s a loss. Do you think our U.S. clients would be willing to pay us in Canadian dollars? I don’t think many of mine are set up to do that. It’s an issue, that’s for sure.