Tax, fees & accounts
Currency conversion fee
Also called FX spread
What a broker charges to convert between currencies when you buy foreign assets.
How it works
The charge is often expressed as a percentage margin on the interbank rate rather than as a separate fee, which makes it easy to miss.
It applies on the way in, on the way out, and frequently on every dividend received in a foreign currency.
Where it misleads people
A 1% conversion margin on a round trip is 2%, deducted before any return. On short holding periods it can exceed every other cost combined.
Related terms
- Currency riskThe risk that exchange-rate moves change your return on a foreign holding.
- BrokerThe firm that holds your account and sends your orders to the market on your behalf.
- Transaction costsThe trading costs a fund incurs inside the portfolio, on top of its stated expense ratio.
- Exchange rateThe price of one currency in terms of another.
More in Tax, fees & accounts
- FIFO and other lot methods
- Capital gains tax
- Income tax on investments
- Average cost
- Platform fee
- Withholding tax
- Stamp duty
- Wash sale
All 11 Tax, fees & accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.