Two kinds of exchange rate
When you search "exchange rate today", you see one number per pair. That number is a reference rate: the midpoint between the prices at which large banks buy and sell the currency among themselves. It is also called the mid-market or interbank rate.
Nobody sells currency to the public at that midpoint. A bank, card network, payment service or exchange office buys at a lower price and sells at a higher one, and the gap is how it earns money. That is the retail rate, and it is the one on your statement.
Where the difference comes from
| Source of the difference | What it looks like |
|---|---|
| Margin in the rate | The rate itself is worse than the reference rate, often by 1–5% |
| Foreign-transaction fee | A separate line or a percentage added by your card issuer |
| Transfer fee | A fixed amount per international transfer |
| Timing | Your card may convert at the rate of the day the payment settles, not the day you paid |
| Dynamic currency conversion | A shop or ATM abroad converts into your currency at its own rate |
Card networks such as Visa and Mastercard publish the rates they use, and some banks publish their daily rate tables. Specialist transfer services often advertise rates close to the reference rate and show the fee separately.
How to check what you actually paid
- Take the amount charged in your own currency from your statement.
- Divide it by the amount in the foreign currency. That is your effective rate.
- Compare it with the reference rate for that day. The difference, in percent, is the real cost of the conversion.
Doing this once for your bank and once for your card tells you which one to use abroad.
Keeping the reference rate in view
A reference rate is most useful when it is in front of you at the moment you decide. The Exchange Rate extension keeps the rates for your currencies in Chrome's side panel, updated every hour, and shows any price you hover over in your currency. It does not know your bank's margin, so for a final amount, add the margin you measured above.
If you are waiting for a better reference rate before paying, set a rate alert and check the provider's quote when it fires.