Foreign Exchange
How currency margins quietly cost you (and how to see them)
When you send money abroad, the exchange rate you are given is rarely the exchange rate that actually exists. Between the two sits a margin: a small percentage added to the "mid-market" rate that most people never notice, because it is folded into a single number. It looks like the price of the currency. It is really the price of the currency plus a fee.
The mid-market rate, and everything on top of it
The mid-market rate is the midpoint between what buyers and sellers are willing to trade a currency for at a given moment. It is the rate you see on Google or a financial news site. No retail customer gets it exactly, but it is the honest reference point. A provider's real cost to you is the gap between that mid-market rate and the rate they hand you.
High-street banks commonly add 2 to 3%. Card networks and consumer apps vary. The number is often invisible because there is no line item that says "FX margin" on your statement, only a converted total.
Why a small percentage is not a small number
A 2.5% margin on a £250,000 supplier payment is £6,250. Make that payment monthly and it is £75,000 a year, spent on nothing but the spread. For a business moving money across borders regularly, FX margin is frequently one of the largest costs nobody has on a budget line.
- It scales with volume, so the more you trade, the more it takes.
- It is charged every time, so it compounds across a year of payments.
- It is opaque, so it is rarely negotiated or even measured.
How to see it in three steps
1. Find the mid-market rate for your pair at the moment you convert. 2. Divide the rate you were actually given by the mid-market rate. 3. The difference, as a percentage, is your margin. Do this once and the cost stops being invisible.
What a better rate looks like
Wholesale FX, the kind that flows through interbank and Tier 1 liquidity rather than a retail desk, is priced far tighter. Vault Money typically works to around 0.4%, roughly a sixth of a 2.5% bank margin, because we route client flow through a network of regulated counterparties instead of a single bank's retail pricing.
The point is not to trust a headline number, though. It is to measure your own. Put your real transfer size and currency pair into a calculator that shows the bank margin next to a tighter one, and you will see exactly what the spread is costing you.
See your own numbers
Our FX savings calculator compares a traditional bank margin with Vault Money on your transfer size and currency pair.
Open the FX calculator