Two months to cash, clear A$ cheque
This is a story about a cheque that started life in Australia and spent about two months flowing through the system before being finally cleared.
Along the way the fees paid together with the foreign currency losses for a product that’s supposedly in a sunset industry, were enough to feed a family of five for about a week.
If there’s an upside it’s that this journalist gained a more than useful insight into the back office issues associated with foreign currency — and will act differently next time. Indeed, it’s difficult to know if any parties emerged as winners as two of the banks advised they either underpriced their services or were hurt by currency changes. Here’s the time line:
In August I was in Australia visiting my mother, and like many grandmothers she wanted to give her grandkids a gift. So we headed off the Commonwealth Bank, the country’s largest.
The major question was in which currency with US$, Euros, British Pounds or A$ on offer. Because the A$ was trading above the C$, I opted for A$ with the cheque, that came with a $30 fee, drawn on the Bank of Montreal. The cheque then winged its way to Canada.
That’s where the drama started as unbeknown to me; I was given a non micro-coded cheque, meaning it did not have a whole series of numbers across the bottom. I later learned it’s standard practice for the Commonwealth to issue unencoded drafts for A$.
I took it to a TD branch where I am not known and was told it would take at least a month to clear. That seemed too long so I took it to the TD branch where I’m known. As a favor, the A$ cheque was converted and the money duly moved into my account. (The kids then received their gift.) The rate was lower than what I had expected – but the banks seem to maintain a healthy spread on foreign currency.
A few weeks later, TD advised that they were passing on a $60 charge that it had paid to get BMO to get the cheque cleared. BMO has a minimum $30 charge for doing the clearing plus two extra $15 payments that cover the cost of sending messages to the two banks involved. BMO said other Canadian banks charge more for this service.
About a month later I was in my local branch when the staffer said, not too happily, “you and your cheque. It cost us money.”
He pointed out that between the time when I received my C$ in exchange for the A$ cheque and when the bank actually received the C$, the A$/C$ currency had moved – meaning the bank received fewer C$ than what it paid me. And that’s a negative to its profit pool.
Next time, I will use an international money transfer, which is normally possible with the funds available in two-three days. While my situation could be typical, one banker told me of their problem: one of their kids was living in the U.S. and trying to pay a C$ credit card bill. In our last conversation no ready solution had been reached – meaning the parents will likely be paying the bill.