Ahh the dark, mysterious world of 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 FX 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 Transferwise and Xe.com.
It’s important to note that no one ever actually gets this rate. Unfortunately, most people only realise this if they spot the small print or when they get less USD than expected.
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%)
As you can see, the thing about percentage fees is that a little change makes a big difference. We’ve kept the example to deposits over $500, but keep an eagle eye out with other providers, even a $2 minimum winds up being a massive 4% fee on a $50 deposit:
Above is an example of how our fee stacks up (we got these numbers at 5pm on April 9th 2020 from interest.co.nz).