The information contained in this article is aimed at Czech users but may also be relevant to users from other countries. You can contact us to find out about the best bank account offers available in other countries.
When funding our Interactive Brokers (IBKR) account, we send money abroad, incurring international bank transfer fees. These fees vary from bank to bank, with certain banks charging noticeably lower fees. Before selecting a bank account that we plan to use for deposits and withdrawals, we need to decide which currency we intend to keep in our Interactive Brokers account. The all-in-one solution for everyone does not exist. Our decision is influenced by the asset type we plan to trade. Individual assets from around the world are traded in different currencies. We also need to consider currency risk, exchange fees, deposit and withdrawal fees. Let’s look at the most common situations when trading CZK, USD, and EUR. What can we do to minimize the transaction fees when operating with these currencies?
As mentioned above, the process of depositing and withdrawing funds from Interactive Brokers will depend to a certain extent on which currency we plan to keep in our account. It is important to remember that the stocks of various foreign companies are traded in different currencies. For example, when using our S&P Balanced Strategy, we are trading US companies in US dollars. If we decide to keep another currency in our account when implementing this strategy, we will have to borrow USD from the broker on margin and pay interest fees. We can avoid paying these fees by maintaining a balance in USD on the brokerage account, but then we are exposed to a higher currency risk than if we kept a balance in CZK. You can find more about interest rates on margin loans and currency risk in another of our articles here.
For most users from the Czech Republic, the Revolut application is the cheapest and easiest way to deposit and withdraw funds. Revolut is an online bank with low exchange and transaction fees. Let’s assume we want to deposit, withdraw and maintain our IBKR balance in CZK. With Revolut, the deposit fee will cost us a maximum of CZK 150.00, while the withdrawal of funds from IBKR to Revolut is free. With the cheapest Czech banks, we would pay a minimum of CZK 200.00 for the deposit and withdrawal (Air Bank CZK 200.00, Fio banka CZK 300.00, Equa bank CZK 328.00). Other Czech banks charge a fee calculated as a percentage of the amount transferred. If we were using these banks to transfer large sums, we could end up paying over CZK 2,000 for a deposit and withdrawal (Raiffeisenbank, ČSOB, Česká spořitelna, KB). It is worth the little effort to create a free Revolut account if we do not already have an account at one of the cheaper banks.
If we decide to keep our IBKR balance in USD, the most economical deposit method is to deposit CZK and exchange it for USD on the IBKR platform itself. We will pay an extra USD 2.00 exchange fee, but we would pay much more if we deposited USD directly into our account. In our case, the USD is sent from a Czech bank (from Lithuanian bank in case of using Revolut) to a US bank account owned by IBKR. For the same reason, withdrawing CZK is also more economical than withdrawing USD.
We also have the option to use the SEPA transaction system. This payment system makes transactions in EUR among most EU banks free of charge. If we decide to deposit, withdraw and keep the IBKR balance in EUR, we will not pay any fees for the transfer or exchange of our money. Unfortunately, this is not the case for most of us as we generally have a CZK balance and want to trade US stocks in USD. Even in this situation, we can use the Revolut application to exchange CZK for EUR, then deposit EUR and pay minimum transaction fees. That is if we plan to deposit relatively small amounts. Revolut will not charge us any exchange fee when exchanging less than CZK 25,000 per month. That is one of the benefits of having their free “Standard” plan. If we exchange a higher amount during one month, we pay a 0.5% exchange fee on the amount exceeding CZK 25,000. Therefore, if we deposit less than CZK 55,000 per month into our IBKR account, we can use Revolut to save the most on all transaction fees. In Revolut, we exchange CZK to EUR, deposit EUR into IBKR via SEPA, and finally exchange EUR to USD on IBKR. When depositing amounts higher than CZK 55,000, it is more cost-effective to deposit CZK directly.
The best bank account for Czech users to make deposits and withdrawals from IBKR is the Revolut account. Air Bank, Fio banks, and Equa Bank also offer accounts with relatively low fees for international bank transfers. It is always best to check with your bank before making a deposit or withdrawal from IBKR because the fees for international bank transfers may change.
All information provided in this article is valid at the date of publication.