How to calculate an exchange-rate markup

Choose a reference you can compare

A mid-market rate is the midpoint between buying and selling prices in a currency market. A transfer provider may quote a different rate to its customer. Xe explains that its customer rate includes a margin that varies with the amount, currencies and market conditions.[1]

Record the reference source and its timestamp, then collect the provider’s quote as close to that time as possible. Use the same currencies and the actual amount you intend to exchange. Comparing a morning reference with an afternoon quote mixes price differences with market movement.

A daily central-bank rate needs extra care. The European Central Bank publishes reference rates once per working day and says they are for information, not transaction pricing. A difference from that daily rate cannot, by itself, establish a provider’s markup at another time.[2]

If you only have a daily reference, include its date when reporting your calculation. You can describe the difference between those two prices, but you cannot use it to calculate the provider’s profit.

Put both rates in the same direction

Write each rate as the amount received for one unit of the currency you are sending. For dollars sent and euros received, use EUR per USD. A higher number then buys more euros.

Do this for both rates before subtracting them. Do not compare USD per EUR with EUR per USD. Keep the available decimal places through the calculation, then round the result you report.

Calculate the percentage and the amount

Subtract the provider rate from the reference, divide by the reference and multiply by 100: (0.9200 − 0.9016) ÷ 0.9200 × 100 = 2%.

The provider rate is 2% below this reference. On 1,000 USD converted, the recipient gets 18.40 EUR less: 1,000 × (0.9200 − 0.9016). This is the rate difference before any separate fees. The World Bank’s remittance research also treats the exchange-rate margin and transfer fee as separate cost components.[3]

If your calculation is negative, the provider rate is above your chosen reference. Recheck the timestamps, currency direction and any promotional conditions before describing it as a better rate. A zero result means the rates match; separately charged fees may still apply.

If the recipient needs a fixed amount

Using the same hypothetical rates, suppose you need to deliver 920 EUR. At the reference rate, the calculation is 920 ÷ 0.9200 = 1,000 USD. At the provider rate, it is 920 ÷ 0.9016 = about 1,020.41 USD, before separate fees.

That requires about 2.04% more dollars than the reference calculation. The earlier 2% measured a reduction in euros received for a fixed dollar amount. Here, 2.04% measures an increase in dollars needed for fixed euros. State which calculation you used rather than calling both figures a 2% extra payment.

For a bill that must arrive in full, ask the provider for the total cost to deliver the required amount. Our overseas invoice guide explains how to check deductions and payment instructions.

Add fees when comparing the full payment

If the hypothetical provider converts 1,000 USD and charges another 10 USD on top, your total spending is 1,010 USD. The recipient still gets 901.60 EUR. Dividing 901.60 by 1,010 gives about 0.892673 EUR per dollar spent, including that fee.

That rate after fees answers what your whole payment buys. If you compare it with the reference, the difference already includes the 10 USD charge. Adding the same fee again would count it twice. Include any known outside bank or card charges in your spending as well.

Use Compare for this 1,010 USD example and enter 901.60 EUR as the amount received, then replace those figures with your own quotes. Keep the rate source and time beside your calculation. For a choice between providers, compare final quotes with the same budget, receiving method and arrival requirement.