Cross border cash crunch

"It's close and quick, giving us a sense of going on a vacation where we can do a little shopping and relax," says Chomichuk.

At least once a year, they drive south to shop in Fargo or Grand Forks, mainly browsing through stores they can't find in Winnipeg, such as Target and Victoria's Secret.

"I want to find unique pieces that nobody has for less money," Chomichuk says.

And while they won't be making the drive to the border this Boxing Day weekend for retail therapy, they may still head south in the new year, making a yearly exodus to Phoenix in February to fight off the winter blues.

And they aren't alone. In 2008, Canadians visited the U.S. more than 18 million times and spent more than $12 billion, according to Statistics Canada. These numbers have steadily increased over the last five years -- no doubt in large part to the increase in the value of the Canadian loonie versus the U.S. dollar.

For U.S. Customs and Border Protection, this weekend will seem more like a summer long weekend than one in the dead of winter, says spokesman Chris Misson, adding they will likely see about 1,000 cars passing through each day at the Emerson crossing.

Not ones to miss out on consumer trends, Canadian banks and other financial institutions are increasingly offering products to cater to frequent travellers to the U.S, including U.S.-dollar bank accounts, credit cards and supplemental travel insurance.

"For Canadians going to the States, obviously, taking a lot of cash is not very safe, so it's important for people going to cross-border shop or on vacation to have alternatives," says Ashif Ratanshi, head of branch investments, deposits and direct investing at RBC.

"Those would be taking a credit card or a debit card, and sometimes you won't know what the merchant will accept so you may want to take some denominations of travellers' cheques because those are safe alternatives to cash."

In the past, debit cards were not an option in the U.S, but Ratanshi says more than one million locations now take debit across the U.S.

Although the Canadian dollar is worth much more in U.S. dollars than in the past, he says, the currency exchange rate will continue to be volatile even though the long-term trend is for the loonie to trade at par or above with the U.S. dollar.

"If you want to completely eliminate a fee or the foreign exchange risk, before going to the U.S, you can open a U.S. dollar account a few weeks in advance," he says. "That allows you to dollar-cost-average, where you can average out the cost of the U.S. dollars that you are purchasing."

Froebe says he has owned a U.S. dollar account in the past for that very reason when he frequently travelled south of the border on business, but he is uncertain whether it would be beneficial today, considering he travels to the U.S. fewer than three times a year on average.

Certified financial planner Doug Nelson says he rarely recommends his clients open up U.S. accounts, but a U.S. account and credit card would be handy for Canadians who spend a lot of time in the U.S.

"But you have to wonder: Are the fees that you pay to have that extra account worth the exchange rate risk that you might have?" says Nelson, a retirement and investment adviser with Nelson Financial Consultants.

What he does increasingly suggest to clients who winter in the U.S. is that they purchase U.S. currency exchange traded funds (ETF) to hedge their retirement savings in Canadian dollars against currency fluctuations.

"Let's assume from the Retirement Income Fund (RIF) that they might need $20,000 a year for income while in the U.S," he says. "Then you might raise the question: How much can the currency change during that period of time?"

The worst-case scenario is it might change 20 per cent, which would mean a $4,000-difference on that amount of money. "Theoretically, in order to cover your same U.S. dollar expenses every month, you would have to cash in more Canadian dollars in order to pay those same U.S. expenses."

An investor could offset that risk by purchasing a U.S. currency ETF -- like PowerShares US Dollar Index Bullish ETF or the Horizons BetaPro U.S. Dollar Bull Plus ETF, for example, which would increase in value as the U.S. dollar rises against the Canadian dollar.

This would help mitigate the decrease in the value of investments held in Canadian dollars that are converted into U.S. dollars to cover the cost of living down south.

Investors often assume that in order to hedge against the currency, they will need to cover their entire account.

But they only need to cover the amount they will be spending in the U.S. even though the ETF will be held for a much longer period, often for at least a year.

"Even if for six months, you're losing on the hedge, you might make it up on the other six months of the year."

But the goal is to hedge currency with the ETF to make the exchange fluctuations have little or no effect on income used in the U.S. If the ETF loses money, the losses should be neutralized by gains on the income side as less Canadian dollars convert into more U.S. dollars.

A currency hedge, however, isn't the only area where you're best advised to seek some insurance for protection.

"It's advisable to hedge yourself with insurance or at least making sure you have adequate coverage," Ratanshi says. "If you get into an accident or fall ill, a stay in the hospital can cost thousands of dollars. Even a cut and stitches is in the hundreds of dollars."

Manitoba Health provides emergency coverage in the U.S, but it is based on an average rate set by the province. Any amount above that rate is your responsibility.

Insurance companies also offer supplemental coverage packages that can be catered to the length of your stay in the U.S, ranging from as little as a day to long-term coverage.

"Don't assume you're covered. Do the homework," Ratanshi says, adding many people have supplementary coverage through their employers. "If you're going down and adequately covered, obviously, there's no sense in getting additional coverage."

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How much booty can you bring back without duty or taxes?

Less than 24 hours: No exemptions; the provincial sales tax and the GST are payable on purchases made during same-day border crossings and duties may also apply if the goods are not made in North America. (Any item made in North America has no duties regardless of time spent in the U.S.)

After 24 hours: You may bring back $50 duty- and tax-free

After 48 hours: Your personal exemption is $400

After 7 days: You are entitled to $750 duty- and tax-free.

The following amounts of alcohol can be imported free of duty and taxes after at least 48 hours away from the country:

1.5 litres of wine

1.14 litres of alcohol

a combination of wine and liquor not exceeding a total of 1.14 litres (40 ounces)

24 cans or bottles of beer or ale (8.5 litres maximum).

The following amounts of tobacco can be imported free of duty and taxes if you leave the country for at least 48 hours:

200 cigarettes (1 carton);

50 cigars or cigarillos;

200 grams (7 ounces) of manufactured tobacco

200 tobacco sticks.

Gifts

If gifts do not exceed C$60 and are for a Canadian friend or relative, they are duty- and tax-free -- as long as they're not alcohol, tobacco or advertising products.

You need those stinkin' passports

Make sure you are carrying proper identification for yourself and any children travelling with you in the vehicle, Canada Border Services Agency (CBSA) states. You don't need a passport to get back in, but it is preferred.

Here are some acceptable IDs:

an enhanced driver's licence (apparently some Manitobans actually have one)

a birth certificate with accompanying photo identification (such as a regular driver's license)

a permanent residence or green card

a citizenship card or a certificate of citizenship or naturalization, or a certificate of Indian Status.

Of course, you will never make it into the U.S. without proper ID in the first place. You now need a valid passport. If you don't have that, here are some alternatives.

A NEXUS card;

A Free and Secure Trade (FAST) card

An enhanced driver's licence/enhanced identification card

for children under 16, a copy of their birth certificate.

For a smooth return:

have receipts for purchases readily available

declare all purchases regardless exemptions; there are serious consequences for undervaluing or not declaring purchases.

For border wait times, visit the CBSA's website at www.cbsa.gc.ca

Ouch that hurts, and we don't mean your accident!

Cost of a stay in a Canadian hospital, per day: $837

Cost of a stay in a U.S. hospital, per day: $3,181 to $12,708

-- International Federation of Health Plans

Premium costs for health insurance coverage for travel to U.S:

Single 30-year-old travelling from Winnipeg to Grand Forks, North Dakota for two days: $24.

Family of four (two adults, 40 years old) travelling from Winnipeg to Fargo, North Dakota for three days: $48.

-- RBC Insurance

Republished from the Winnipeg Free Press print edition December 26, 2009 B18