Currency Converter

What a currency conversion costs

Every conversion carries a price, and the price hides in the rate rather than on a line labelled fee. A bank that quotes 0.8924 when the mid-market rate is 0.92 is not lying; it is buying your dollars at one price and selling you the other currency at another. The gap between those two prices is the spread, and it is charged on every dollar you convert.

The mid-market rate, also called the interbank or reference rate, is the rate at which banks trade large amounts with each other. The Federal Reserve publishes daily reference rates in its H.10 release. That rate is what a search engine shows you, and it is not a rate any consumer can get, because nobody sells retail currency at wholesale.

So the first rule of travel money: the number on the screen is the wholesale price, and the number on your receipt is the retail price. The difference between them is what the conversion cost you, whether or not a fee was mentioned.

Buy rate, sell rate and the spread in between

A currency dealer posts two prices. The buy rate is what it pays for the currency you are handing over. The sell rate is what it charges for the currency you want. Both sit on the same side of the mid-market rate, and the dealer keeps the difference.

If mid-market is 0.92 and the dealer runs a 3% margin, it will give you 0.8924 per dollar when you buy foreign currency, and it will give you 1.0553 dollars per unit when you sell that currency back. Notice that 1 / 0.9476 = 1.0553, and 0.9476 is 0.92 x 1.03. The two rates are not mirror images of each other; both are worse than mid-market, which is how the business works.

The round trip number is the one to remember. Converting $500 out at 0.8924 gives 446.20 units. Converting those 446.20 units back at 1.0553 gives $470.87. The 5.83% gap is two spreads stacked, and it is why leftover foreign cash is worth spending before you fly home rather than converting twice.

Worked example: $500 at a 3% markup with a $5 fee

Take $500, a mid-market rate of 0.92, a 3% markup and a $5 fixed fee. Work through it in order, because the fee and the spread do not apply to the same base.

• Mid-market value: 500 x 0.92 = $460.00
• Rate you get: 0.92 x (1 - 0.03) = 0.8924
• Converted before fees: 500 x 0.8924 = $446.20
• Fixed fee in the local currency: 5 x 0.8924 = $4.46
• Money that lands: 446.20 - 4.46 = $441.74

Now price the whole thing in dollars, which is the only way to compare offers. Take what you received, convert it back at the mid-market rate, and subtract from what you spent: 441.74 / 0.92 = 480.15, and 500 - 480.15 = $19.85. That is 19.85 / 500 = 3.97% of the amount converted.

Note that the headline markup was 3% and the real cost was 3.97%, because the fixed fee adds 0.97 of a percentage point on a $500 transaction. The smaller the amount, the larger that addition gets.

Why the rate on your receipt is not the rate online

Regulation Z, the federal rule that governs credit card disclosures, is explicit about how a foreign transaction fee is measured. The official commentary to 12 CFR 1026.4 says the dollar amount of the transaction is calculated first, using a currency conversion rate outside the card issuer's control, and any amount charged above that converted figure is the foreign transaction fee. It also gives the common structure directly: a card network may impose 1% and the issuing bank another 2%, for a 3 percentage point fee on the consumer.

That definition matters for two reasons. First, it confirms that the rate on your statement is a market rate, and the fee is the layer on top. Second, it explains why two cards can show different totals for the same purchase on the same day: the network rate differs slightly, and the fee differs a lot.

For US tax purposes the IRS guidance on foreign currency and exchange rates sets out how a transaction is translated into dollars, which is a separate question from what your bank charged to do it.

It also sets up the trap called dynamic currency conversion. When a merchant or ATM offers to charge you in your home currency instead of the local one, the conversion is done at their rate, not the network's, and the markup is often 3% to 7% on top of whatever your card charges. Decline it and pay in the local currency, every time.

Card, ATM, bank branch or kiosk

Four ways to get foreign money, ranked by what they usually cost. The percentages below are assumptions you can change in the calculator, not published prices, because every bank sets its own.

The ordering is stable even when the exact numbers move: a card with no foreign transaction fee is cheapest, a card with a fee is next, a bank branch or ATM sits in the middle once fixed fees are counted, and an airport kiosk is last by a wide margin.

The ATM row is worth a second look. At 3% plus $5 it costs $19.85, slightly more than a flat 4% bank spread at $20.00, and the gap widens on smaller withdrawals. That is why the standard advice is to withdraw larger amounts less often: one $500 withdrawal at 3% plus $5 costs 3.97%, while five $100 withdrawals cost 7.85% each because the $5 repeats five times.

Card versus cash also changes the rate itself. A card converts at the network rate, which tracks the wholesale market closely. An ATM converts at the machine operator's rate, which can be worse, and then your bank may add its own foreign transaction fee on top. Cash from a branch is the least transparent of the three, because the spread is baked into a single number with nothing to compare it to.

The direction of a quote, and how to invert it

A rate is always a ratio between two currencies, and which one is on top changes everything about how the number reads.

If 1 US dollar buys 0.92 units of the foreign currency, then 1 unit of that currency buys 1 / 0.92 = 1.0870 dollars. Multiply by the other one and you get back to 1, which is the check that catches most inversion mistakes: 0.92 x 1.0870 = 1.0000.

Three habits prevent the usual errors:

• Say the pair out loud. "Dollars per euro" and "euros per dollar" are different numbers, and a quote is meaningless without the direction.
• Sanity check with a familiar purchase. A coffee that costs 3 units should cost about 3 x 1.0870 = $3.26. If your arithmetic says $0.92, you inverted the rate.
• Check the size of the number. A rate of 0.92 and a rate of 1.0870 are the same fact. A rate of 0.00092 is a different currency with a different scale.

This is also where fixed-fee math gets confusing. A $5 fee is 1% of $500 but 5% of $100, and it is charged in dollars while your spending happens in the local currency. Convert the fee at the same rate you used for the purchase, as the worked example does, or the total will not add up.

Fees that stack on one transaction

Three charges can land on one transaction, and they stack.

The foreign transaction fee. Usually 0% to 3% of the amount, charged by the card issuer, sometimes split with the network. This is the one to check before you travel, because a no-fee card saves the whole 3%.

The ATM operator fee. A flat charge from the machine's owner, often $3 to $6 abroad, plus whatever your own bank adds for using an out-of-network machine. Flat fees are why small withdrawals are expensive.

The conversion spread. Built into the rate, invisible on the receipt, and charged by whoever performs the conversion. On a card it is close to the wholesale rate. At a kiosk it can be several percent.

Add them on a $200 withdrawal with a 3% fee, a $5 bank charge and a $3 machine charge: 200 x 0.8924 = 178.48 units, minus 5 x 0.8924 = 4.46 and 3 x 0.8924 = 2.68, leaves 171.34 units. In dollars that is 171.34 / 0.92 = 186.24, so the real cost is 200 - 186.24 = $13.76, or 6.88% of the withdrawal.

That is more than double the headline 3%, and it is the normal case rather than a worst case. The lesson is not to avoid cash; it is to take fewer, larger withdrawals and to carry a card with no foreign transaction fee for everything that accepts one.

Building a travel money plan

A workable travel money plan, in order of impact.

Check the card before the trip. One no-fee card for purchases and one backup from a different network is enough. Confirm the fee in the cardmember agreement rather than the marketing page, and set a travel notice if the issuer asks for one.

Withdraw local currency at a bank-owned ATM. Airport machines and standalone kiosks charge the most. Decline the offered conversion, take a larger amount once, and keep the receipt.

Spend the last of the cash before you fly home. A round trip through a dealer's spread costs about 5.83% on the money you convert twice, which is more than most souvenirs.

Budget with a cushion. Convert your planned spending at the rate you expect, then add 5% for spread and fees. On a $1,500 trip budget that is $75, which is close to what the fees come to.

Exchange rates move every day, and the rate you plan with will not be the rate you get. Use the calculator with the quote in front of you, not with a number from a search result, and treat the output as an estimate of cost rather than a promise of what the bank will charge.

Rates, fees and card terms change without notice, and this page does not quote a live rate. Confirm the current rate and the fee schedule with your bank or card issuer before you rely on either.