Currency Spread Markup in Money Transfers

Currency Spread Markup

Understanding Currency Spread Markup in Money Transfers

When sending money internationally, the term “currency spread” or “markup” often comes into play. This hidden cost can significantly affect the amount your recipient receives. Understanding currency spread markup is essential to ensure you get the best value for your money transfers. This article will delve into what currency spread is, how it impacts your transfers, and tips for minimizing this cost.

What is Currency Spread Markup?

Currency spread markup refers to the difference between the wholesale exchange rate (also known as the interbank rate) and the rate offered to consumers by money transfer services. This difference is essentially a fee that providers charge for converting currency. While it might seem like a small percentage, it can add up quickly, especially for large transfers.

How Does It Impact Your Transfers?

The impact of currency spread markup can be substantial. For instance, if the interbank exchange rate is 1 USD to 0.85 EUR, a transfer service might offer you 0.83 EUR for each USD. This difference, known as the spread, is where the provider makes a profit. Even a small spread can result in your recipient receiving significantly less money.


  • Interbank Rate: 1 USD = 0.85 EUR
  • Provider Rate: 1 USD = 0.83 EUR
  • Transfer Amount: 1,000 USD
  • Received Amount: 830 EUR instead of 850 EUR

In this example, the 20 EUR difference represents the currency spread markup.

Tips to Minimize Currency Spread Markup

  1. Compare Rates: Always compare the rates offered by different money transfer services. Online comparison tools can help you find the best rates with the lowest spreads.
  2. Use Specialist Providers: Some providers specialize in offering lower currency spreads. Companies like Wise (formerly TransferWise) are known for their transparent fees and minimal markups.
  3. Avoid Peak Times: Exchange rates can be more volatile during peak financial periods. If possible, avoid transferring money during these times.
  4. Check the Total Cost: Some providers may advertise low fees but have high currency spread markups. Ensure you understand the total cost of your transfer by considering both the fees and the exchange rate offered.

Why Do Providers Charge a Currency Spread?

Money transfer providers charge a currency spread to cover the costs associated with currency conversion and to make a profit. This practice is standard in the financial industry. However, the size of the markup can vary significantly between providers, which is why it’s crucial to shop around.

Understanding the currency spread markup in money transfers is vital for anyone sending money internationally. By being aware of this hidden cost and taking steps to minimize it, you can ensure that more of your money reaches your intended recipient. Always compare rates, use specialist providers, and be mindful of the total cost of your transfer to get the best value for your money.


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