What happens when you exchange currency for international travel or transfers
When you exchange one currency for another — whether at an airport, bank, or online service — you are buying foreign money at a rate set by the market that day. The rate you actually pay includes a markup: the exchange business keeps a percentage as profit. Different providers charge different markups, so the same 100 euros costs more at an airport kiosk than at your bank or an online currency service. The markup is how these businesses make money; there is no hidden fee, but the rate you see advertised is rarely the rate you pay.
International transfers work the same way. When you send money to another country, the bank or transfer service converts your dollars (or pounds, or yen) at their rate, takes their cut, and the recipient gets the remainder in their local currency. The speed of the transfer, the amount you send, and the countries involved all affect which provider offers the best rate and lowest fees.
Key Takeaways
- Every currency exchange includes a markup — the difference between the mid-market rate (what banks pay each other) and the rate you receive — which is how the provider makes profit.
- Airport kiosks, hotel desks, and tourist-area exchanges typically charge the highest markups; banks and online transfer services usually charge less.
- The total cost of exchanging money includes both the markup on the rate and any flat fees the provider charges per transaction.
- Real-time rates change constantly throughout the day, so locking in a rate in advance (if the provider offers it) protects you from rate swings before your transfer completes.
- For large international transfers, comparing the all-in cost across providers — not just the exchange rate — determines how much money the recipient actually receives.
Where the exchange rate comes from and why it changes
The mid-market rate is the rate banks pay each other when they trade currencies in bulk. It changes constantly — multiple times per minute — based on supply and demand in the global currency market. You see this rate on financial websites and currency converters, but you cannot actually get it yourself. It is the starting point that every currency provider uses, then adds their markup on top.
The markup varies widely. A bank might add 2 to 3 percent. An airport kiosk might add 8 to 12 percent. An online transfer service might add 0.5 to 2 percent. The markup is not a hidden fee — it is the visible difference between the rate the provider quotes you and the mid-market rate. If the mid-market rate for euros is 1.10 dollars per euro, and your bank quotes you 1.07, the markup is roughly 3 percent in the bank's favour.
Rates also shift based on economic news, interest rate changes, and political events in the countries involved. If you are sending money next week and the rate moves against you, you will receive less in the foreign currency. Some providers let you lock in a rate for a set number of days — usually 2 to 30 days depending on the service — so you know exactly how much the recipient will get, even if the market rate changes before the transfer completes.
Comparing costs across different types of providers
| Provider Type | Typical Markup | Flat Fees | Speed | Best For |
|---|---|---|---|---|
| Airport or hotel kiosk | 8–12% | Usually none | when ready (cash) | Small amounts of cash when you arrive |
| Bank branch or ATM | 2–3% | $15–$50 per transfer | 1–5 business days | Customers with existing accounts; larger transfers |
| Online transfer service (Wise, OFX, Remitly) | 0.5–2% | Usually none; some charge per transfer | 1–3 business days (varies by country pair) | Frequent senders; large amounts; specific country corridors |
| Credit card or debit card abroad | 1–3% | $0–$5 per transaction | when ready | Small purchases; backup payment method |
| Money transfer service (Western Union, MoneyGram) | 3–5% | $5–$20 per transfer | Minutes to hours | Cash pickup; countries with limited banking |
The lowest total cost is not always the lowest markup. A service with a 1 percent markup but a $25 flat fee costs more than a service with a 3 percent markup and no fee if you are sending $500. For a $5,000 transfer, the 1 percent service wins. Calculate the all-in cost — markup plus fees — for the exact amount you are sending before you commit.
Online transfer services have gained market share because they typically charge lower markups and fewer fees than banks, especially for transfers between countries outside the United States. However, not all services operate in all countries, and some charge different rates depending on the destination. Check whether the service you are considering actually handles transfers to the specific country you need.
How to lock in a rate and what happens during the transfer
When you initiate a transfer with a bank or online service, you see a quote that includes the exchange rate, any fees, and the total amount the recipient will receive. That quote is usually valid for a short window — often 10 to 30 minutes — meaning if you confirm the transfer within that time, you get that rate. If you wait longer, the rate may change and you will see a new quote.
Some providers offer a forward contract or rate lock, which lets you lock in a rate for days or weeks in advance. This is useful if you know you will send money on a specific date but want to protect yourself from the rate moving against you. The provider charges a small fee or a slightly wider markup to hold that rate for you. For example, you might lock in a rate today for a transfer you plan to make in two weeks, guaranteeing the recipient's amount even if the market rate shifts.
Once you confirm the transfer, the money leaves your account when ready (or within one business day, depending on your bank). The provider converts it at the rate you locked in, deducts fees, and sends the foreign currency to the recipient's bank account. The time it takes to arrive depends on the countries involved and the banking systems they use. Transfers within Europe or between the US and Canada often complete within 1 to 2 business days. Transfers to developing countries or less common currency pairs can take 3 to 5 business days or longer.
What affects the rate you receive for large transfers
If you are sending a very large amount — typically $10,000 or more — you may be able to negotiate a better rate or lower fees, especially with banks or specialized currency brokers. Banks sometimes offer tiered pricing: the more you transfer, the lower the markup. Online services usually have fixed rates regardless of amount, but some have volume discounts or special rates for business customers.
The currency pair also matters. Common pairs like US dollars to euros or pounds have tight markups because there is high trading volume. Rare pairs — say, US dollars to Philippine pesos or Icelandic króna — have wider markups because fewer people trade them and the provider takes on more risk holding that currency. If you are sending to a less common destination, expect to pay more.
Timing can also shift the rate in your favour or against it. If you are sending money regularly, you might benefit from splitting large transfers across multiple days to average out rate fluctuations, though this costs more in fees. Conversely, if you are sending a one-time large amount, locking in a rate in advance removes the guesswork.
Using ATMs and cards abroad to avoid some exchange costs
Withdrawing cash from an ATM in the country you are visiting often gives you a better rate than exchanging cash before you travel. Your bank converts the withdrawal at their rate (usually 2 to 3 percent markup) and charges an ATM fee (typically $2 to $5 per withdrawal). Exchanging cash at an airport kiosk before you leave costs more in markup alone. However, ATM fees add up if you withdraw small amounts multiple times, so one or two larger withdrawals usually cost less overall.
Using a debit or credit card to make purchases abroad also uses the bank's exchange rate plus a foreign transaction fee (usually 1 to 3 percent). Some banks and credit card issuers waive foreign transaction fees for customers who meet certain criteria, so check your account terms. For small purchases, the card rate is often competitive with ATM withdrawals. For large purchases, compare the card's all-in cost against withdrawing cash and paying in local currency.
Avoiding common mistakes when exchanging currency
The biggest mistake is exchanging money at the airport or hotel. These locations have a captive audience with limited options and charge the highest markups — sometimes 10 to 15 percent. If you must exchange cash before traveling, do it at your bank a few days before departure. If you arrive without local currency, withdraw from an ATM instead of using a kiosk.
Another common error is not checking whether your bank or card issuer charges a foreign transaction fee. Some accounts charge 3 percent on every purchase or ATM withdrawal abroad; others charge nothing. Knowing this before you travel helps you decide whether to use your card, withdraw cash, or use a specialized travel card that waives these fees.
A third mistake is comparing only the exchange rate without factoring in fees. A service with a slightly worse rate but no flat fee can cost less overall than a service with a better rate and a $25 fee. Always calculate the total amount you will pay or the total amount the recipient will receive, not just the rate.
Finally, do not assume the first provider you find is the best. Rates and fees change, and different providers excel in different country pairs. If you send money regularly to the same country, spend 10 minutes comparing three providers for your specific transfer amount and destination. The difference can be substantial over time.
Frequently Asked Questions
Why is the exchange rate at my bank different from the rate I see online?
The rate you see online is usually the mid-market rate — what banks pay each other. Your bank adds a markup on top of that rate, which is their profit. The markup varies by bank and by whether you are exchanging cash, making a transfer, or using a card abroad. Your bank's rate is always worse than the mid-market rate because of this markup.
Can I get the mid-market rate myself?
No. The mid-market rate is only available to banks and large financial institutions that trade currencies in bulk. Individual customers always pay a markup. Some online transfer services come closer to the mid-market rate than others, but you will never match it exactly. The best you can do is find a provider with the smallest markup for your specific transfer.
Is it better to exchange money before I travel or when I arrive?
It depends on the amount and the destination. For small amounts of cash, exchanging at the airport when you arrive is convenient but expensive. For larger amounts, exchanging at your bank before you leave costs less. For most of your spending, using an ATM or card abroad usually offers a better rate than either option. A mix — a small amount of cash exchanged before you leave, plus ATM withdrawals and card purchases once you arrive — often costs the least overall.
What does "locking in a rate" mean, and should I do it?
Locking in a rate means the provider guarantees you a specific exchange rate for a set number of days, usually 2 to 30 days. If the market rate moves against you during that time, you still get the locked rate. If it moves in your favour, you do not benefit. Lock in a rate if you are worried the currency will weaken against the dollar before your transfer, or if you want certainty about how much money the recipient will receive.
Why do online transfer services charge less than banks?
Online services have lower overhead costs — no physical branches, fewer employees — and they specialize in transfers, so they handle high volume at thin margins. Banks offer many services and have higher operating costs, so they charge more on each transfer to cover those costs. For transfers, online services are usually cheaper; for other banking services, your bank may be more convenient or offer better rates.