How Currency Exchange Works
Currency exchange involves converting one currency to another at a specific rate. The process involves multiple parties, each adding their own costs. Understanding this flow helps you identify where to save money.
Key Definitions
Mid-Market Rate
The midpoint between buy and sell prices on global currency markets. This is the "true" exchange rate with no markup. Also called the interbank rate.
Buy/Sell Spread
The difference between what a provider pays for currency (buy rate) and sells it for (sell rate). This spread is how providers make profit.
Markup/Margin
The percentage added to the mid-market rate. A 3% markup means you receive 3% less currency than the true rate.
Commission Fee
A separate fee charged per transaction, either as a flat amount or percentage. Always factor this into total cost when comparing.
Provider Comparison Example
Converting $1,000 USD to EUR at different providers shows how costs vary. The mid-market rate is $1 = €0.93.
| Provider Type | Rate Offered | Markup | Fee | EUR Received | Total Cost |
|---|---|---|---|---|---|
| Mid-Market (Reference) | €0.9300 | 0% | $0 | €930.00 | $0.00 |
| Wise / Revolut | €0.9280 | 0.2% | $3 | €925.00 | $5.38 |
| Online Bureau | €0.9100 | 2.2% | $0 | €910.00 | $21.51 |
| High Street Bank | €0.8900 | 4.3% | $5 | €885.00 | $48.39 |
| Airport Bureau | €0.8400 | 9.7% | $8 | €832.00 | $105.38 |
* Example rates for illustration. Actual rates vary by provider and date.
Our Methodology
Rate Collection
We collect exchange rates from multiple sources every 30 minutes during market hours. Our primary data comes from the foreign exchange interbank market, supplemented by provider-specific rates where available.
Provider Comparison
We compare the customer rate offered against the mid-market rate to calculate the true cost including any hidden margins. This gives you an apples-to-apples comparison.
Data Sources
Update Frequency
Mid-market rates update continuously during forex trading hours (Sunday 5pm ET to Friday 5pm ET). Provider rates are updated as frequently as providers publish them.
Related Information
For practical guidance on exchanging money for travel, see our Travel Money Guides. For information about how we work with providers, see our Financial Incentive Notice. For emerging payment technologies, see Digital Currencies & CBDCs.