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 they would allow you to fund your trading account from any bank, 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 the spot rate.
This is potentially a great saving.
A month ago, I have the problem of having some USD in my Wise 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 a wire transfer to another country.
Wise 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 favourable than the rates charged by your bank
- Allows you to receive money in a different currency with their virtual bank account (this is how I receive money from a United States source in USD
- Spend with a Virtual debit card
Wise 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 Wise virtual account in the foreign currency
- Send the money from Wise via Direct ACH 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 Direct ACH Transfer in Interactive Brokers Account
We start this by going to Transfer & Pay and selecting Deposit Funds
Out of all the options, you can choose Direct ACH Transfer from your Bank.
You will receive this notification warning that your bank account needs to be held in the United States. Click Yes.
You would need to sign this agreement by typing in your name.
Interactive Brokers will provide you with the instructions to set up the ACH at Wise.
What you need to take note of is your Routing Number and Your Account Number. That is your ACH number to put in Wise and the account number.
Now, the account number given by Interactive Brokers has a letter “U” in between. That will not be permissible in Wise. If you look at Important notes, it will ask you to replace “U” with “0”.
We will do this accordingly later.
Now let us go over to Wise.
Step 2: Configure TransferWise to Send Money via ACH to Interactive Brokers
When you log in to Wise, you will see a screen like this. Select your USD account on the left panel under Balances.
Then click on Send.
You have the option to send International or the Same Currency. Choose Same Currency.
Under New recipient choose Business or charity.
I did not key in their email.
I entered Interactive Brokers LLC, the ACH routing number and Account number given by Interactive Brokers.
Account type chose Checking.
Here is how I keyed in Interactive Brokers address. Do note that your address may be different but I highly think that it should not change so much.
Review the details that you key in and enter your IBKR account number as a reference.
Then click Confirm and Send.
That is it! You have finished the money sending process.
Now it is time to wait!
How Long Will Your TransferWise Money Arrive and be Ready in Interactive Brokers?
Apparently, Direct ACH transfer looks pretty fast.
This is compared to the previous experience when I use Wire transfer to Interactive Brokers.
If you go to Interactive Brokers, then Transfer & Pay, then Transaction History, you can review the status of the transaction.
If you look at the timeline, I created this Direct ACH in Wise on 30th Nov and on Interactive Brokers, it shows that the funds are received and available trading on 30th Nov.
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 compared 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 Guides
Interactive Brokers is a great low-cost brokerage platform that can be the standard broker for you to hold your long-term investments. You have access to various exchanges such as Singapore, the US, Hong Kong, London, European and Canada exchanges. Fully digital-first.
To get started or get familiar, you might want to check out some of my past articles on wealth building with Interactive Brokers. I hope it makes your life easier and brighter.
I invested in a diversified portfolio of exchange-traded funds (ETF) and stocks listed in the US, Hong Kong and London.
My preferred broker to trade and custodize my investments is Interactive Brokers. Interactive Brokers allow you to trade in the US, UK, Europe, Singapore, Hong Kong and many other markets. Options as well. There are no minimum monthly charges, very low forex fees for currency exchange, very low commissions for various markets.
To find out more visit Interactive Brokers today.
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