Why your bank's exchange rate is worse than the one you looked up
· 5 min read
You look up the euro rate before a trip, get a number, and then your card statement shows something worse. The rate was not wrong. It was a wholesale price, and you are not a wholesaler.
Mid-market means the middle of a spread
At any moment there is a price at which large institutions will buy a currency and a slightly higher price at which they will sell it. The mid-market rate is the midpoint between those two. It is the rate quoted by search engines, financial news, and our converter.
Nobody sells currency to the public at the mid-market rate. It is a reference point, not an offer. Treat it as the benchmark against which you measure what you were actually charged.
What gets added on top
- The exchange margin. The main one, and usually invisible because it is baked into the rate rather than itemised. Typically 0.5% to 3% for a card, and considerably more at an airport bureau de change, where 10% is not unusual.
- A foreign transaction fee. A separate percentage, often around 3%, that some cards add on top of the margin.
- Dynamic currency conversion. The terminal abroad offers to charge you in your home currency. It sounds helpful. It hands the conversion to the merchant’s payment processor at a rate they choose, and it is almost always worse. Always pay in the local currency.
The rates here are dated on purpose
Our figures come from the European Central Bank’s daily reference rates, captured when the site was last built, and the page shows the date they were published. They do not tick while you watch, and we would rather say so plainly than imply a liveness we do not have.
For the thing most people actually want a converter for — roughly what does this cost in my money — a rate from this morning and a rate from this second are indistinguishable. If you are moving a large sum, you want a live quote from whoever is moving it, not a reference rate from anyone.
How to see what you paid
Take the amount that landed on your statement in your own currency, divide it by the amount in the foreign currency, and compare that against the mid-market rate for the day of the transaction. The difference, expressed as a percentage, is what the conversion cost you. It is often the first time people see the number, because it is never printed anywhere.
