Ahh the dark, mysterious world of foreign exchange (also known as FX), where nothing is as it seems. The currency exchange industry is a fascinating beast (if you’re into that sort of thing). If you’re not, here’s foreign exchange made easy:
1. Providers get a wholesale rate
Banks and other providers buy and sell money at what we call the ‘interbank’ or wholesale rate. This is the rate you see if you search Google for USD to NZD, or on the homepage of currency exchange providers like Wise and Xe.com.
However, everyday people NEVER get that rate. You'll find out in the small print (or when you get less USD than expected) that every provider tacks a fee on top of it.
2. Providers create their own exchange rate
This is where some of that dark mystery comes in. Most of us assume there is one true exchange rate, but actually many providers can create their own. You can check this helpful page on Interest.co.nz to see the different rate each bank will give you.
Once providers add fees to their own rates, and tack on a minimum fee, it makes it very tricky to compare apples with apples.
Fortunately, we keep it simple.
3. Hatch takes the interbank rate and includes a 0.5% fee
We keep our FX fees simple, transparent and ridiculously cheap (and we don’t have any minimums!). This is how we calculate it:
1 NZD = (0.60 - (0.60 * 0.005))
1 NZD = (Interbank rate - (Interbank rate * 0.5%))
Here's an example of how our fee stacks up:
0.5% fee (Hatch)
1% fee (Competitor)
Converting through ASB
1 NZD = 0.6 USD
0.5888 USD (+ 1% fee)
We got these numbers at 5pm on April 9th 2020 from interest.co.nz.