If you wish to start investing with Interactive Brokers, you will need to transfer money from your local bank account to Interactive Broker’s bank account first.
Once you have successfully funded the account, you can convert the currency and start investing.
You can read my guide on how to fund your interactive brokers account and also how you can withdraw money from your interactive accounts.
Interactive Brokers can be rather interesting because it would allow you to fund your trading account from any banks, that is under your name, and withdraw money to a lot of banks registered with your name.
Thus, it can act as an intermediate currency exchange between your local USD account and a foreign GBP account. In my Interactive Brokers currency guide, I explained that when you change from one currency to another in Interactive Brokers, the rate is very close to spot rate.
This is potentially a great saving.
A month ago, I have this problem of having some USD in my TransferWise account.
I wonder if instead of transferring the USD to my DBS Multiplier USD account, could I transfer to Interactive Brokers?
Why Do We Need TransferWise to Send Money to Interactive Brokers?
As a Singaporean, I have no problem funding my Interactive Brokers account. I can use FAST Transfer to fund my account with SGD or DBS Remit to fund my account with USD. Both options are considered as a Wire transfer.
Both options are free.
Unfortunately, other international banks may charge international investors an exorbitant fee to perform wire transfer to another country.
TransferWise is an international payments company with a few payment services that you can use to reduce the cost of currency exchange:
- Send money with money in one currency to another entity in another currency at an exchange rate more favorable than the rates charged by your bank
- Allows you to receive money in different currency with their virtual bank account (this is how I receive money from an United States source in USD
- Spend with a Virtual debit card
TransferWise might not always have the best rates. There are also similar platforms such as Revolute and OFX.
With TransferWise, we can potentially create this use case:
- Send money from an international entity via ACH (Automated Clearing House) to your TransferWise virtual account in the foreign currency
- Send the money from TransferWise via Wire Transfer into InteractiveBrokers
- Use Interactive Brokers to convert the money at near spot rates (incurring SG$2.80 of fee)
- Withdraw the money to a local bank for free (you are limited to one free withdrawal per month)
Of course you could just use the money to trade or invest (which is what I did)
Limitation of TransferWise for Singaporeans
I want to thank a reader for pointing out some of the limitations of using TransferWise for Singaporeans.
With the Singapore Banking Payments Act, there is a limitation to how much money you can send, hold, and spend on your payments account.
You can read the banking payments act here.
The limitation is
- you can’t hold more than 5,000 SGD in your e-wallets by the end of the day Singapore time
- you can’t transfer more than 30,000 SGD from your TransferWise balance each year
With this, it becomes a real bummer for Singaporeans. However, this might be useful for our international friends.
So here is how you can carry this out.
Step 1: Setup Your Deposit Instructions in Interactive Brokers
We start this by going to Transfer & Pay and select Deposit Funds
Select the currency to deposit in (in this case I chose USD) and Bank Wire
I name this institution as TransferWise and enter the Account number. I gave a nick name called TransferWise Kyith to identify the transaction.
I will let them know this is not a HK or China financial institution and the deposit amount to be $20.
Once all this is done, I will click on Create Deposit to finish this portion.
Where can you find your TransferWise account number?
Now go to your TransferWise Account. Click on the USD virtual account on the left sidebar.
Click on Your USD bank details to view the bank details. Select Inside the US.
In the details, you can find the Account Number.
Interactive Brokers will provide you with the bank wire instructions that you will need to set in TransferWise to send the money across.
Step 2: Configure TransferWise to Send Money
Now hop on over to TransferWise
Click on the Send money button on the side bar.
Choose to send from the account where your currency is in. In my case it is USD.
Choose Same Currency.
In this case, I’m trying to send US$20 to Interactive Brokers in USD.
I was charged USD$1.05.
I tried to vary the amount and the charge is still USD$1.05. To some, this is an absolute bargain.
Next select Business or Charity.
I did not enter an email address. I name the business as Interactive Brokers LLC, United States.
From Interactive Broker’s instruction, I key in the address as specified in the image above.
I would also enter the routing number and account number, then select Checking.
From the bank wire instructions, put the ABA routing number into Routing number.
The befuddling one is the account number. Interactive Brokers will give you an account number in the form of 1234567U8901234.
Your account number is the part from the start till before “U”. In this case it is 1234567.
The reference space is very small, so what I did was to put my Interactive Brokers account id.
Then I click Confirm and Send.
TransferWise will tell you that your money is on the way.
If you click on the transaction in Transferwise you can see the progress and the estimated time it takes to process.
Now it is time to wait!
How Long Will Your TransferWise Money Arrive and be Ready in Interactive Brokers?
A long time!
To be fair the transfer at TransferWise is pretty swift. Observe that it took just 1 day for them to send out the money.
If you go to Interactive Brokers, then Transfer & Pay, then Transaction History, you can review the status of the transaction.
I was stunned that it will take like 5-6 working days to get the money.
However, if cost is an issue, we have to bear with the wait.
We are just afraid we will missed things during this wait.
I hope that this method is cost effective and will stick around for some time. We might never know if Interactive Brokers will pull a stun by prohibiting this form of transfer.
I think the most sensible thing is not to do any currency conversion. Do the currency conversion in Interactive Brokers as the rates are better there compare to a lot of other platforms.
If you have tried with OFX, revolute and it works for you, do let me know.
My Comprehensive Interactive Brokers How-to Funpack
Here are some of my past articles on wealth building with Interactive Brokers. I hope it makes your life easier and brighter.
- An Easy Step-By-Step Guide to Setup Interactive Brokers (IBKR)
- How to Fund & Withdraw Funds from Your Interactive Brokers Account
- How to Convert Currencies in Interactive Brokers
- How to Buy and Sell Stocks and Securities on Interactive Brokers
- How Competitive are Interactive Brokers Commissions Pricing? And Also Explaining the US$10 Monthly Activity Fee
- Send Money from TransferWise to Interactive Brokers
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