Foreign exchange also known as FX, is when one currency is converted into another. To trade US shares on Hatch, we need to exchange your NZD for USD. FX fees or currency conversion fees can vary a lot between providers, so how do banks and other financial providers calculate foreign exchange fees?
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.
🚨 Important: Individual investors don't get the wholesale/ interbank rate. You'll find out in the small print (or when you get less USD than expected) that every provider adds a fee on top of it.
2. Providers can create their own exchange rate
You might 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 to exchange currencies.
Once providers add fees to their own rates, and apply a minimum fee, it can make it difficult to compare apples with apples.
3. Hatch takes the rate from our FX provider and includes a 0.5% fee
We keep our FX fees simple, transparent and competitive (and we don’t have any minimums!). This is an example of how the fee is calculated:
1 NZD = Interbank rate - (FX provider rate * 0.5%)
Here's an example of how our fees compare
Using an exchange rate (FX rate) of 0.6 USD
Deposit amount | 0.5% fee (Hatch) | 1% fee (Competitor) |
$500 NZD | $2.50 NZD | $5.00 NZD |
$1k NZD | $5.00 NZD | $10.00 NZD |
$10k NZD | $50.00 NZD | $100.00 NZD |