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IBKR Auto Currency Conversion vs Manual FX: When Should You Convert SGD to USD?

Auto currency conversion vs manual FX on Interactive Brokers, SGD to USD.

A lot of Singapore investors using Interactive Brokers ask me the same question: should I change my SGD to USD myself first, or just let IBKR do it automatically when I buy?

This matters if you regularly use SGD to buy USD ETFs listed on the London Stock Exchange, such as VALL, VWRA & CSPX.

At first glance, this looks like an easy choice. If you convert the currency yourself on the spot FX market, IBKR only charges 0.20 basis points, which works out to 0.002%. If you let IBKR convert it automatically instead, they adjust the exchange rate by about 0.03%. Since 0.002% is much smaller than 0.03%, converting it yourself should always be cheaper, right?

Not quite.

There's a catch. Every time you manually convert currency, IBKR charges a minimum fee of US$2 per order, even if 0.002% of your amount works out to be much less than that. This changes things a lot for smaller amounts. For most people doing a regular monthly investment, you're not really paying 0.002%, you're paying a flat US$2 per conversion. Auto-conversion, on the other hand, doesn't charge a separate fee at all. The cost is simply built into the exchange rate you get, at roughly 0.03%.

Let's figure out where the actual breakeven point is.

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Option 1: Let IBKR Automatically Convert SGD to USD

If you have SGD sitting in your account but you're buying something priced in USD, and you don't have enough USD cash, IBKR can automatically convert the currency for you.

IBKR does this by adjusting the exchange rate slightly, usually by about 0.03%. There is no separate fee charged on top of this. The cost is simply built into the exchange rate you get.

So the rough cost is simply: Amount converted × 0.03%

Using that fixed rate, here's what the 0.03% auto-conversion fee looks like at different amounts:

For a typical monthly investment amount, this fee is tiny, just a few cents.

Option 2: Manually Convert SGD to USD

Instead of letting IBKR convert automatically, you can also go into the currency market yourself and convert SGD to USD before you buy your ETF.

IBKR's fee for this starts at 0.20 basis points of the amount you're converting. One basis point is just 0.01%, so 0.20 basis points works out to 0.002%. That's an extremely small percentage.

But there's a minimum fee of US$2 per order. For most regular investors, this US$2 minimum is what you'll actually pay, not the tiny 0.002% rate. The percentage rate only kicks in once your conversion is large enough that 0.002% of it is more than US$2.

So Where Is the Breakeven?

So the real question is: at what amount does the 0.03% auto-conversion fee become as expensive as the flat US$2 manual fee?

Here's the sum: US$2 divided by 0.03% (or 0.0003) works out to about US$6,667.

Using our fixed rate of US$1 = S$1.27, that works out to about S$8,500.

So the breakeven point, based on IBKR's published fees, is around US$6,667 / S$8,500.

Below this amount, letting IBKR auto-convert is actually cheaper than manually converting and paying the US$2 minimum. Above this amount, converting manually starts to become the cheaper option, based purely on these published fees.

Example 1: Converting S$1,000

S$1,000 is roughly US$787.

Auto-conversion: S$1,000 × 0.03% = S$0.30, or around US$0.24.

Manual FX: minimum commission of US$2, which is around S$2.54.

So in this case, trying to save money by converting manually actually costs you more. You'd pay about US$2 instead of just US$0.24.

Example 2: Converting S$5,000

S$5,000 is approximately US$3,937.

Auto-conversion: S$5,000 × 0.03% = S$1.50, or approximately US$1.18.

Manual conversion: minimum of US$2.

Auto-conversion is still cheaper here. I used to think S$5,000 was roughly the point where manual conversion made sense, but looking closely at IBKR's actual numbers, S$5,000 is still below the real breakeven point.

Example 3: Converting S$10,000

S$10,000 is approximately US$7,874.

Auto-conversion: S$10,000 × 0.03% = S$3.00, or approximately US$2.36.

Manual conversion: minimum of US$2.

This time, manual conversion is technically cheaper. But look at how small the difference is, we're comparing US$2.36 versus US$2.00, a gap of about US$0.36, or roughly S$0.46.

So yes, manual conversion wins on paper. But is that saving big enough to actually matter to you? That's a different question.

The S$8,500 Threshold Works Both Ways

Some people naturally think in SGD, "how much SGD am I converting?" Others already have a USD amount in mind, "how much USD am I buying?"

So I would remember both numbers together:

Below this amount, auto-conversion tends to be cheaper. Above it, manual conversion starts to have the edge.

Does This Mean I Should Manually Convert Everything Above S$8,500?

No.

The breakeven point only tells you when one option becomes cheaper. It doesn't tell you when the difference is actually big enough to matter.

At S$10,000, you're only saving less than S$0.50. Personally, I wouldn't add an extra manual step to my monthly investing routine just to save 50 cents.

But imagine converting S$50,000 instead. The 0.03% auto-conversion fee would cost around S$15. Now the gap compared to the tiny manual FX fee is big enough to notice. The bigger the amount, the more it makes sense to convert manually.

My Rule of Thumb

Here's how I simplify this for my own investing.

I just let IBKR auto-convert. The US$2 minimum fee makes it hard to justify converting manually for such a small amount.

The two options cost about the same here, so I just go with whichever is more convenient.

Manual conversion is worth considering. The bigger your transaction, the more that 0.03% difference actually adds up.

Don't Compare 0.002% With 0.03% Without Reading the Fine Print

This is the most common mistake I see people make with this math.

People see manual FX at 0.002% and auto FX at 0.03%, and assume manual is 15 times cheaper. The percentages themselves are correct. But for smaller amounts, they don't matter because of the US$2 minimum fee.

What matters is what you'll actually pay, not just the advertised percentage. This applies to brokerage fees in general, not just currency conversion.

What About Buying UCITS ETFs on the LSE?

For most Singapore investors, converting currency is only step 1. After that, you still need to actually buy the ETF.

For USD ETFs listed in London, such as VALL, VWRA & CSPX, IBKR also charges a minimum trading commission, which is another cost worth understanding. I'll cover that in the next article in this series: how much you should invest per trade, so IBKR's US$1.70 minimum LSE commission and Singapore GST don't eat into your returns as much.

Ask Me Your IBKR Question

This is part of my IBKR Singapore Q&A series. Instead of rushing through 20 questions, I'm picking out the ones people keep asking and breaking down the real numbers behind them.

Got an IBKR question you want answered? Post it in the HoneyMoneySG Telegram chat, and I'll pick the best ones for future articles.

Final Thoughts

The one number to remember from this article is US$6,667, or about S$8,500. That's roughly where the 0.03% auto-conversion fee catches up to the US$2 manual FX minimum.

Below that amount, manual conversion isn't automatically cheaper. Above it, it starts to win. But even then, ask yourself: is the saving actually worth the extra effort?

There's a difference between keeping your costs low and spending your time chasing cents. I care about costs. But I also care about keeping my investing process simple enough that I'll actually stick with it.

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Disclosure: This article contains referral links to Interactive Brokers; if you sign up through them, including via the hmsg.link/ibsg welcome-rewards link, HoneyMoneySG may earn a small commission at no extra cost to you. Promotional rewards are subject to Interactive Brokers' eligibility requirements and latest terms and conditions. Interactive Brokers Singapore Pte. Ltd. is licensed and regulated by the Monetary Authority of Singapore (Licence No. CMS100917). Figures in this article are based on IBKR's published pricing at the time of writing and are for illustration only; actual fees, exchange rates and GST treatment may vary and exchange rates fluctuate constantly. I am not a licensed financial adviser under Singapore's Financial Advisers Act. This article is for general information and educational purposes only, does not take into account your personal financial situation or objectives, and does not constitute financial advice or a recommendation to buy, sell or hold any specific product. Please conduct your own research, and consider seeking advice from a licensed financial adviser, before making any investment decision.