What an exchange rate is
An exchange rate states how many units of a target currency equal one unit of a source currency. Converting an amount is a single multiplication: the amount in the source currency multiplied by the rate gives the amount in the target currency. If 1 US dollar buys 0.92 euros, then 100 dollars converts to 100 × 0.92 = 92 euros; converting back the other way uses the inverse rate, 1 ÷ 0.92 ≈ 1.086957 dollars per euro.
Every currency pair has two directions of rate -- dollars-per-euro and euros-per-dollar -- which are reciprocals of each other. Because the two directions can look similar in size for some currency pairs, entering a rate 'upside down' (using dollars-per-euro where euros-per-dollar was intended) is one of the most common sources of error when converting currency manually.
The mid-market rate: the fairest benchmark
The mid-market rate, also called the interbank rate, is the midpoint between the global buy and sell prices for a currency pair at a given moment. It is the rate shown on financial data sites such as Google Finance, xe.com, Reuters and Bloomberg, and it is generally treated as the fairest single benchmark for what a currency is worth, because it sits exactly between what large institutions are willing to pay and accept for that currency on the wholesale market.
Central banks also publish reference rates: the European Central Bank, for example, publishes euro foreign exchange reference rates each business day, based on a regular concertation procedure between central banks. These published reference and mid-market rates are benchmarks for comparison -- they are generally not the rate an individual consumer will actually receive when exchanging money, which is the subject of the next section.
Why your bank's rate is worse: the spread
Banks, card networks and money-transfer services do not typically give consumers the mid-market rate. Instead they apply a margin, commonly called the spread, on top of it -- sometimes alongside a separate fixed fee. The size of the spread varies by institution, currency pair, transaction amount and channel, but it is the primary reason a rate quoted by your bank looks worse than the rate you can find published online for the same currency pair at the same moment.
The table below summarizes typical spread ranges by channel, as an indicative comparison rather than a guarantee for any specific provider. Card network rates for purchases abroad tend to track closest to the mid-market rate, while walk-up cash exchange at airports and tourist locations tends to carry the widest margins.
| Rate type | What it is | Typical margin vs mid-market |
|---|---|---|
| Mid-market (interbank) | Midpoint of global buy/sell prices; the reference benchmark | None -- the reference itself |
| Card network rate (Visa/Mastercard) | Rate applied to card purchases abroad, before bank fees | Usually well under 1% |
| Bank transfer / retail rate | Rate applied to transfers and cash exchange | Commonly around 1-5% |
| Airport / tourist kiosk rate | Walk-up cash exchange | Often the widest spreads, sometimes 5-10%+ |
Why this site's converter uses a rate you supply
This site's currency converter deliberately asks for a rate you provide rather than pulling one automatically from a live feed. A live feed goes stale between the moment it is fetched and the moment you act on it, differs slightly between data providers, and hides the assumption of which rate -- mid-market, bank, or otherwise -- is baked into the calculation. Entering the rate yourself makes that assumption explicit and puts you in control of which scenario you are testing.
This design also lets the same converter answer two different questions: what would this amount be at today's fair mid-market rate, and what will I actually receive at the rate my bank or transfer service quoted me? Running the conversion once with each rate and comparing the two results shows the real cost of the spread in concrete currency terms, rather than as an abstract percentage.
Where to find the current mid-market rate
Financial data sites such as Google Finance, xe.com, Reuters and Bloomberg publish continuously updated mid-market rates for essentially any currency pair, and are a reliable first stop for the benchmark figure. Central banks are a second reliable source for major currencies: the European Central Bank publishes daily euro reference rates against dozens of other currencies, and other central banks publish similar reference rates for their own currencies.
To find the rate that will actually be applied to a specific transaction -- rather than the mid-market benchmark -- check the rate disclosure your bank or transfer provider is required to show before you confirm the transaction, or the published rate calculators that Visa and Mastercard maintain for card transactions abroad. Comparing that quoted rate against the mid-market rate from a financial data site reveals the spread being charged.
Frequently asked questions
What is the mid-market exchange rate?
The mid-market rate, also called the interbank rate, is the midpoint between the buy and sell prices at which currencies trade on the global market at a given moment. It is the rate shown on financial data sites like Google Finance, xe.com, Reuters and Bloomberg, and it is the fairest single benchmark for a currency's value, though it is not usually the rate a consumer will actually receive from a bank or transfer service.
Why does my bank give me a different rate than I see online?
Financial data sites show the mid-market rate, while banks, card networks and money-transfer services apply their own margin -- the spread -- on top of it, commonly ranging from under 1% for card network purchases to several percent for bank transfers and cash exchange, sometimes with a separate fixed fee added. Comparing your quoted rate against the mid-market rate reveals the size of that spread.
Where can I check today's mid-market exchange rate?
Financial data sites such as Google Finance, xe.com, Reuters and Bloomberg publish continuously updated mid-market rates for most currency pairs. For major currencies, central banks also publish daily reference rates -- the European Central Bank, for example, publishes euro reference rates against other currencies each business day.
What is a spread in currency exchange?
A spread is the margin a bank, card network or money-transfer service adds on top of the mid-market rate before applying it to a customer's transaction. It functions as the provider's compensation for handling the exchange and, along with any separate fixed fee, accounts for the difference between the rate you see quoted on a financial data site and the rate you actually receive.
Why doesn't this site's currency converter pull live exchange rates automatically?
The converter is designed to use a rate you supply so the arithmetic stays transparent and never depends on a feed that could be stale or differ from what your own bank or provider applies. Entering the rate yourself also lets you directly compare scenarios -- for example, running the same amount once at today's mid-market rate and once at the rate you were actually quoted, to see the cost of the spread in real currency terms.
How do I convert an amount in the opposite direction?
Use the inverse rate, which is 1 divided by the original rate. If dollars convert to euros at a rate of 0.92, euros convert back to dollars at 1 ÷ 0.92 ≈ 1.086957. Checking that the inverse rate looks reasonable is also a useful way to catch an accidentally 'upside down' rate entry before relying on the result.
References
- European Central Bank -- Euro foreign exchange reference rates (published each business day). ecb.europa.eu.
- Consumer Financial Protection Bureau (CFPB) -- remittance transfer rules: disclosure of exchange rates and fees. consumerfinance.gov.
- Bank for International Settlements (BIS) -- Triennial Central Bank Survey of foreign exchange markets. bis.org.