Although transaction fees are on everyone’s mind when choosing a discount broker, there are a couple of other less obvious culprits: the foreign exchange and margin interests.

If you want to convert your Canadian currency to purchase US securities, your broker will charge you a spread on the exchange rate. This rate varies by brokers. IB’s spread is 5 basis point, or 0.05%, while my big bank’s is 1.25%. That’s a difference of $120 when you convert $10,000 Cdn to US, each way!

IB’s margin rate calculation isn’t so straight-forward, and it depends on the balance of the margin loan and the prevailing Canadian LIBOR overnight rate. Let’s cut to the chase. For investors with margin loans less than $115,000, the current rate is 5.75%, while my big bank charges 7%. On a $10,000 margin, the difference is $125 per year. To find out more about IB’s margin rate, visit here.