What Is a Currency Spread and How Much Is It Costing You?

When you exchange money, the rate you get is almost never the rate you see quoted on financial websites or currency converters. There's always a gap — and that gap is where the cost of the transaction lives. It's called the spread, and understanding it is the single most useful thing you can know about foreign exchange.

The buy rate and the sell rate

Any currency exchange provider — a bank, a bureau de change, an online transfer service — deals in two prices simultaneously: the rate at which they will buy a currency from you, and the rate at which they will sell it to you. These are always different, and the difference is the spread.

From your perspective as a customer, when you're selling USD to get NZD, the provider buys your USD at the buy rate (lower) and gives you NZD at the sell rate (higher, relative to the mid-market). You always receive a worse rate than the midpoint. The provider profits from the gap between those two rates without needing to charge a separate commission — which is why "0% commission" is a technically accurate but misleading claim.

How to calculate the spread

The spread is most useful when expressed as a percentage of the mid-market rate, because that tells you the real cost of the transaction regardless of the currency amounts involved.

This calculation works for any currency pair and any provider. Once you know the mid-market rate, you can evaluate any quoted rate in a single step.

Typical spreads by type of provider

Airport and hotel exchange booths: The worst offenders, with spreads typically ranging from 7–12% on the mid-market rate. Their customers are captive — already at the airport or hotel, needing cash urgently — so there's little competitive pressure to offer reasonable rates.

High street banks: Generally 2–5%, depending on the currency pair and the bank. Some banks offer better rates for customers who order currency in advance online rather than over the counter. Banks often add a flat transaction fee on top as well.

Supermarket and post office travel money services: Often competitive with banks, particularly when ordered online with collection in-store. Spreads of 1.5–3% are common for major currency pairs.

Specialist online transfer services (Wise, OFX, and similar): The most competitive for the underlying exchange rate, often within 0.3–1.5% of mid-market for major pairs. Most of these services are transparent about their fees, showing both the exchange rate they apply and any separate fee charged.

Credit and debit cards abroad: Visa and Mastercard typically apply a rate very close to the mid-market rate (within 0.5–1%), but your card provider may add a foreign transaction fee of 1–3% on top. Cards with no foreign transaction fee are among the best options for spending abroad.

Hidden fees vs transparent spreads

Providers structure their pricing in different ways, and some structures obscure the true cost more than others. A service that charges a 1.5% spread with no separate fee is more transparent than one that advertises "zero commission" but applies a 4% spread. A service that charges a 0.5% spread plus a flat $5 fee might be cheaper for a large transfer but more expensive for a small one.

The only reliable way to compare is to calculate the total amount your recipient will receive in the destination currency. Two providers converting $3,000 to GBP: Provider A gives £2,340, Provider B gives £2,290. The difference is £50 regardless of how either provider frames their fees. That number is the ground truth.

Why the spread varies by currency pair

Spreads are narrower on major, heavily traded pairs like USD/EUR, USD/GBP and USD/JPY — because the market for these is deep and liquid, with many buyers and sellers constantly active. Spreads widen on "exotic" currency pairs (less traded currencies like the Thai baht, Indonesian rupiah or South African rand) because there's less market activity, more risk for the provider, and fewer competing services to drive the price down.

This is worth bearing in mind if you need to convert between two non-USD, non-EUR currencies. Going via USD as an intermediate step is sometimes cheaper than converting directly, because the two USD legs might each have tighter spreads than the direct cross rate.

Exchange rates shown on CurrencyConverter247 are mid-market reference rates for informational purposes only. They do not represent rates available from any bank, exchange provider or transfer service. Fees and spreads vary by provider and currency pair.