How Much Do Currency Exchanges Really Charge You?

Currency exchanges don't just "exchange" your money—they take a cut, and it’s often hidden in the exchange rate itself. The percentage can vary wildly, depending on the method you use, the provider, and the location. So how much are you actually losing when you convert currency?

Let’s dive straight in.

Banks vs. Currency Exchange Services: Banks might seem like a safe bet for currency conversion, but they typically charge a "markup" on the exchange rate. This is where the bank or service provider adjusts the rate to include a profit for themselves. The markup typically ranges between 1-5%. For example, if the current USD to EUR rate is 1.10, a bank might offer you a rate of 1.12 to 1.15. In this case, you're losing around 2-4%.

Currency Exchange Kiosks: If you've ever used a currency exchange service at an airport, you know the pain. They often charge the highest rates, with markups sometimes exceeding 10%. You’re paying for convenience. Let’s break it down in a table for clarity:

Provider	Typical Markup	Additional Fees	Best For
Major Banks	1-5%	Small transaction fees	High-value transactions
Airport Exchange Kiosks	7-15%	Often none	Immediate cash before travel
Online Currency Services	0.5-3%	None	Lower-cost options for planning

Hidden Fees: Besides the markup, many services add transaction fees, service fees, or even a "handling" fee. These can range from a flat $5-10 per transaction or 1-3% of the amount converted. In the case of ATMs, you may encounter foreign withdrawal fees, which can further add 1-4%.

Credit Card Foreign Transaction Fees: Many credit cards charge a foreign transaction fee when making purchases abroad. This is usually 2-3% on top of the conversion fee the bank applies. However, some credit cards, especially travel-focused ones, offer no foreign transaction fees.

Online Platforms and Apps: There’s been a surge in fintech platforms like Revolut, Wise (formerly TransferWise), and PayPal, which are challenging traditional banks. These services often offer lower markups (0.5-2%) and are transparent with their fees. They also allow you to lock in rates in advance, which can save money if you expect the currency to fluctuate.

Forex Brokers: If you're dealing with large sums of money, like when buying property or making international investments, using a forex broker can save you thousands. They usually offer the best exchange rates with markups as low as 0.1-0.5%, but these are mainly accessible for larger amounts (often $5,000+).

Let’s take a real-world example:

• You're exchanging $1,000 USD to EUR.
• The interbank rate is 1.10, meaning you'd expect to get €1,100.
• A major bank offers you a rate of 1.13, meaning you receive €1,123.
• An airport kiosk gives you a rate of 1.20, meaning you receive only €1,050.

The difference is €73, or about $80, just from choosing the wrong provider!

Pro Tip: Always ask about the total cost of currency conversion, including hidden fees. Some services will quote “zero fees” but hide their profit in the exchange rate itself. Checking mid-market rates online before converting can help you see how much extra you’re paying.

Special Case: Bitcoin and Cryptocurrencies In recent years, cryptocurrencies have emerged as an alternative way to transfer value internationally without dealing with banks. However, converting fiat currency into crypto and vice versa comes with its own costs. Cryptocurrency exchanges charge anywhere from 0.1-1% per transaction, and this doesn’t account for potential price volatility during the exchange process.

Final Thoughts: The percentage that currency exchanges charge can vary from less than 1% to over 10%, depending on how and where you exchange your money. Always compare rates, be mindful of hidden fees, and choose the method that offers the lowest overall cost.