Ask a bank what it charges to convert currency and you will often be told, truthfully, that there is no commission. That answer is complete only if you also ask what rate they are using — because for most retail banks, the rate is the charge.
The one calculation that matters
Whatever the provider, whatever the product, the real cost of a conversion is:
cost % = (1 − amount received ÷ amount at mid-market) × 100
To use it you need two figures. The first is the exact amount that will land — your bank can tell you this, and if it cannot, that is informative in itself. The second is what that amount would be at the mid-market rate, which you can get from the converter on our home page or from any public source.
Worked through: you want to convert 2,000 units of your home currency. The mid-market rate is 1.2500, so a frictionless conversion would produce 2,500. Your bank tells you the recipient will get 2,395.
(1 − 2395 ÷ 2500) × 100 = 4.2%
That is the answer. It does not matter how the bank has split it between "rate" and "fee" internally, or what it is called on the statement. You paid 4.2 percent.
Where the cost hides
The exchange rate markup
The largest component, and the least visible. The bank takes the mid-market rate and shifts it in its favour before quoting you. Because the resulting number still looks like an exchange rate, nothing signals that a charge has occurred. Traditional high-street and retail banks typically apply a markup in the low single digits of a percent on major currency pairs, and often considerably more on less-traded ones. Specialist transfer services generally apply a much smaller markup — sometimes a fraction of a percent — and charge a visible fee instead.
The transfer or wire fee
A flat charge for sending the payment. This one is usually disclosed. Because it is flat, it is punishing on small amounts and negligible on large ones — a flat charge on a 200-unit transfer can exceed 10 percent, while on a 20,000-unit transfer it rounds to nothing. This is the main reason the cheapest provider for a small transfer is often not the cheapest for a large one.
Correspondent and intermediary bank fees
The one that surprises people. An international wire may pass through one or more intermediary banks between sender and recipient, and each can deduct a handling charge from the amount in transit. Your bank did not charge it, cannot always predict it, and often will not warn you about it. The recipient simply gets less than the confirmation said they would.
If you are asked to choose a charge option — commonly labelled OUR, SHA or BEN — that setting determines who absorbs those deductions. OUR means you pay all charges and the recipient gets the full amount; SHA splits them; BEN means the recipient absorbs everything. If it matters that an exact amount arrives — paying an invoice, tuition, a deposit — choose OUR and expect to pay more for the certainty.
The receiving bank's fee
Some banks charge to receive an incoming international payment, and some apply their own conversion if the money arrives in a currency the account does not hold. It is worth asking the recipient's bank rather than assuming.
The weekend and holiday spread
Currency markets do not trade continuously. Over weekends and public holidays, providers widen their margins to cover the risk that rates gap when trading reopens. The same transfer initiated on a Tuesday morning frequently costs less than one initiated on a Saturday night.
Why "no fees" is not a claim about price
A provider can honestly advertise zero fees and still be the most expensive option available, by recovering everything through the rate. This is not fringe behaviour — it is the standard model for airport bureaux, many card conversion products, and a good number of consumer transfer apps.
The inverse is also true. A service charging a clearly-stated flat fee alongside a near-mid-market rate is often dramatically cheaper, especially on larger amounts. The visible fee makes it feel more expensive. It usually is not.
Ignore the fee. Ignore the rate. Ask one question: exactly how much will the recipient receive? Compare that number across providers and everything else takes care of itself.
Cutting the cost
- Compare on receiving amount. Every reputable provider will show it before you commit. Two or three quotes takes five minutes and routinely changes the answer.
- Match the provider to the size. Percentage markups dominate on large transfers; flat fees dominate on small ones. There is no single cheapest provider across all amounts.
- Send fewer, larger transfers where flat fees apply and your circumstances allow.
- Send on a weekday during market hours.
- Always be billed in the local currency when paying by card abroad. Accepting conversion at the terminal is one of the most expensive things you can do with a card — see our guide to dynamic currency conversion.
- Check whether your own bank has a low-markup product. Some multi-currency accounts convert at near mid-market rates within limits, even where the same bank's standard wire is expensive.
When the bank is still the right answer
Cost is not the only variable. Banks have advantages that matter in specific situations: very large transfers where you want an established institutional relationship and a named contact; transactions requiring documentary evidence for tax, immigration or property purposes; corridors where specialist services do not operate; and cases where you need recourse through a familiar regulator. Paying a higher margin to get those things can be entirely rational. The point is to know what the margin is, and to choose it rather than absorb it unknowingly.
Get the benchmark first Check the mid-market rate for your pair, then ask your bank what will actually arrive. The gap is your answer.
Check a rate