Many trading platforms advertise low brokerage fees for US or internationally listed shares, but they may be hiding large currency conversion fees.
Plenty of retail investors are getting enticed into trading platforms offering trading in international shares for supposedly cheap brokerage rates. You can find plenty of advertised rates for trading US listed shares at $20 per trade, or even $15 per trade, but its often in fine print where you end up paying more.
Most of the brokers offering international share trading will also charge you foreign currency conversion fee. For the large bank operated brokers, such as Commsec or NAB Trade, these conversion fees can amount to 50-60 basis points, or sometimes even more; this can cause the brokerage costs to increase, often doubling the costs of making a $5,000 investment.
Even when the currency conversion fee isn’t charged upfront, brokers often charge large fees to convert currency when depositing or withdrawing.
For example, SelfWealth likes to market their US trading “$9.50 Flat-fee US Trading, only pay $9.50 USD per trade. No account fees, no other commissions. It’s that simple.” This may sound attractive, but you need to be aware that you will also be charged 60-basis point currency conversion fee when you transfer money from Australian to US dollars or vice versa.
While these currency conversion fees may not sound like much, they can significantly increase the costs of your investments, potentially eating into profits and extending losses. To see just how much these fees may be costing you, visit our brokerage information page.
Trading through Emerald Equities gives you access to market foreign exchange spreads, this means that instead of paying 60 basis points, you are usually only paying one or two basis points. We don’t charge any other currency conversion fees, and our DIY trading account brokerage rates are also cheaper than just about every competitor.
If you’d like some help when trading overseas, our Advisor assisted trading fees are also extremely competitive, perfect for someone investing abroad for the first time.
If you would like more information on our rates and fees, as well as direct comparisons with our competitors, please click here.
Next week we’ll be covering this topic plus our stock recommendation and research platform in a special webinar – click here to register.