Exchange Rates: Mid-Market, Spread and What Your Bank Charges

The fee that does not appear on the receipt

Send £1,000 abroad with a provider advertising zero commission and you may still pay £30. It is not hidden in a fee line, because it is not in a fee line at all — it is in the exchange rate you were given. This is the standard model for retail currency conversion, and it is legal, disclosed and almost universally misunderstood.

Four ways to lose money on a conversion

Comparing fees instead of rates. The mid-market rate is the midpoint between what buyers and sellers are quoting on the interbank market — the rate you see on Google or Reuters. The margin between that and your quoted rate is the real cost, and it is typically 0.5% at a specialist, 2–4% at a high-street bank, and 5–12% at an airport bureau de change.

Accepting dynamic currency conversion. When a foreign card terminal offers to charge you in your home currency, it is offering to do the conversion at its own rate, usually 3–7% worse than your card's. Always choose the local currency and let your card issuer convert.

Airport and hotel exchange. The worst rates in the market, because the customer is captive and comparison is impossible. Withdrawing local currency from a bank ATM is nearly always cheaper, even with the withdrawal fee.

Ignoring the receiving-side deduction. Some transfers arrive short because an intermediary or the receiving bank takes a cut that the sending provider never mentioned. Ask for the amount that will land, not the amount that will be sent.

Work out what you actually paid

Take the amount that arrived, divide by the amount you sent, and compare that effective rate against the mid-market rate at the time. The percentage gap is your total cost — fees, spread and intermediary deductions combined. It is the only figure that lets you compare two providers honestly, and it is often several times the advertised fee.

Check a rate

The currency calculator converts at a rate you supply, so you can enter the rate you were quoted alongside the mid-market rate and see the spread in cash terms.