FX fees: What you need to know

To help you compare the FX fees charged by different UK investment providers, we've created this interactive chart. Use the slider to see whether the rates change as the size of the trade increases.

FX fees stands for ‘foreign exchange fees'. These are the fees charged by providers to convert a stock's currency to your account ‘home' currency when the two are different.

For example, if your account is held in GBP but you want to buy US stocks valued in USD, there will be a currency conversion fee to pay.

You'll also sometimes hear these fees referred to as ‘currency conversion fees'.

You might have wondered how some providers make money – especially those that offer commission-free trading. FX fees are the answer. They are often a significant source of revenue for providers.

Our research shows that while a provider might look extremely cheap on the basis of headline rates of commission, and zero/very low account fees, it's actually far from cheap when you factor in FX fees.

The costing example below illustrates this point. Toggling between ‘UK stocks' and ‘UK + International stocks' shows just what an impact FX fees can make to total costs:

And yet, because they're not headline grabbing charges, people often ignore FX fees when researching provider costs.

The FX fee you're charged will be the total of the spot exchange rate (the current amount one currency is being traded for another currency on the foreign exchange markets) plus the provider's fee for undertaking the conversion for you.

These add-on fees that providers charge vary considerably. So, if you anticipate trading assets held on exchanges located anywhere other than the UK (assuming your account is held in GBP*), it's worth checking what a provider's FX fees are before opening an account.

* A reminder here that all eToro accounts are denominated in USD. So you'll pay an FX fee to deposit GBP into and withdraw GBP from your eToro account, as well as trading in non-USD assets.

Sometimes FX fees are reduced for those with larger portfolios (this happens with eToro accounts), but usually, where a fee reduces, it's because of the size of a trade.

To help you compare provider FX fees from different providers, we created the interactive chart at the top of this page.

It might seem like common sense to assume that those providers offering commission-free trading are likely to be the ones charging the highest FX fees (got to make a profit somehow!). eToro's chart-topping 1.5% FX fee and, to a lesser extent, Freetrade's high FX fees certainly support that theory. It's also worth remembering that all eToro accounts are funded in USDs! So every non-USD transaction here will incur a currency conversion fee.

Trading 212 bucks the trend as a provider offering zero commission trading but also one of the lowest FX fee rates on the market.

You'll also notice that there are plenty of traditional investment providers charging relatively high FX fees too. interactive investor tops out at 1.5% and Hargreaves Lansdown charges 1% for those with less than £5k in their portfolios.

The cheapest providers are the trading platforms. Interactive Brokers can't be beaten in this respect with 0.002% charged on top of the base rate, although they do have a minimum charges of USD 2.00. Trading 212 also does very well at 0.15% and Saxo isn't far behind at 0.25%. All of these providers offer cheap ways to trade non-GBP assets, whatever size of portfolio you hold.

If your portfolio is valued highly, you'll also benefit from more competitive rates from the likes of AJ Bell and interactive investor. If your portfolio holds more than $250k, then eToro leads the way with 0% FX fees – something no other provider can beat.

My verdict? Avoid eToro if you're heavily trading non-USD assets with a portfolio valued at under $25k. If it's valued over $250k, then eToro is a winner. Trading 212 and Interactive Brokers are great options if you're heavily trading non-GBP assets, whatever your portfolio size.

Of course, there's more to a decision on where to trade than simply FX fees. So read our full reviews to get the full picture on the benefits and drawbacks of each of these platforms.