How Exchange Rates Work
What is an exchange rate?
An exchange rate tells you how much one currency is worth in terms of another. For example, if the EUR/USD rate is 1.08, one euro buys 1.08 US dollars. Rates are quoted in pairs because you are always selling one currency to buy another.
The rate you see vs. the rate you get
The exchange rate your bank doesn't want you to see. That's the mid-market rate - the midpoint between what banks buy and sell currencies for. Think of it as the wholesale price. This converter shows you that rate, so you can see exactly how much your provider is adding on top.
When you actually convert money, the provider adds their cut:
| Channel | Typical markup | On a $1,000 transfer |
|---|---|---|
| Wise, Revolut, OFX | 0.3 - 1.5% | You lose $3 - $15 |
| Your bank | 2 - 4% + fixed fees | You lose $20 - $40+ |
| Debit/credit card abroad | 0 - 3% FX fee | You lose $0 - $30 |
| Bureau de change | 8 - 12% | You lose $80 - $120 |
Use the mid-market rate here as your benchmark - then compare the final amount any provider quotes you.
How are exchange rates determined?
Exchange rates are set by supply and demand in the global foreign exchange market - the largest financial market in the world, trading over $7.5 trillion per day according to the Bank for International Settlements. Central bank interest rate decisions, inflation data, trade balances, and geopolitical events all influence where rates move.
How often do exchange rates change?
Major currency pairs change every second during forex market hours (Sunday 5 pm ET to Friday 5 pm ET). Our data updates every 60 seconds. On weekends and bank holidays, rates hold at the most recent Friday close. Rates for less-traded currencies may update less frequently.
The one rule that saves money every time
When paying by card abroad: always choose the local currency. If the terminal asks "charge in GBP or EUR?" - pick EUR (the local one). Choosing your home currency triggers Dynamic Currency Conversion (DCC), which almost always costs more.
Types of exchange rates
Not all exchange rates work the same way. The three main types are:
| Type | How it works | Examples |
|---|---|---|
| Floating | The rate moves freely based on supply and demand | USD, EUR, GBP |
| Fixed (pegged) | The government locks the rate to another currency | HKD (~7.80/USD), DKK (to EUR), SAR (3.75/USD) |
| Managed float | The rate floats but the central bank intervenes to keep it in a range | CNY, INR, ARS |
For travellers and businesses, the type matters: pegged currencies are more predictable; floating currencies can swing significantly on economic news.
How currency exchange fees work
Every time you convert money, whoever handles the transaction takes a cut. The total cost usually comes from two sources:
- The spread (markup) - the difference between the mid-market rate and the rate you are actually quoted. For example, if the mid-market rate is 1 USD = 0.92 EUR but your bank gives you 0.89 EUR, that 3.3% gap is the markup. It is often invisible because it is baked into the rate itself.
- Fixed fees - a flat charge per transaction, regardless of amount. Common with bank wire transfers ($15-$50) and services like Western Union ($5-$50 depending on the corridor).
How much you lose depends on the channel:
- Transfer services (Wise, Revolut, OFX) - typically 0.3-1.5% total cost
- Banks - markups vary widely by country and bank. In the US and UK, markups of 2-5% are common, plus wire fees of $15-$50. In Europe, some banks offer better rates for intra-EU transfers. Always check the total amount received, not just the headline fee.
- Bureau de change (airport and high-street currency exchanges) - often 8-12% above mid-market rate
- Debit, credit and charge cards abroad - 0% to 3% depending on the card's foreign transaction fee. Many Amex cards charge around 2.99%, for example. The fee is often buried deep in the card's terms and conditions - check before you travel, not after.
Use the mid-market rate shown above as your benchmark. Compare it against what you are actually quoted to see the real cost. Our provider comparison table estimates costs for popular services.
Five golden rules for getting a better exchange rate
- Check the mid-market rate before you do anything else. That is the number on this page. It is the fairest benchmark you will find - if someone is quoting you worse, now you know by how much.
- Compare at least three options. Banks, cards, transfer services and bureau de change all price differently. On a $5,000 transfer, a 2% difference is $100 gone.
- Skip the airport bureau de change. Convenience costs 8-12% in markup. Convert before you leave, or use a card with no foreign transaction fee.
- At the terminal or ATM, always choose the local currency. If the screen asks "charge in GBP or EUR?" pick EUR (the local one). The alternative - Dynamic Currency Conversion - almost always costs more.
- Ignore "zero fee" headlines. Services advertising "no fees" typically hide their profit inside the exchange rate markup. The only number that matters is the total amount you receive.
When is the best time to exchange currency?
There is no guaranteed "best" day or hour - anyone claiming otherwise is oversimplifying. However, a few patterns are worth knowing:
- Weekdays beat weekends. Most forex markets are closed Saturday and Sunday. Services still offer weekend rates but with wider spreads (bigger markup), meaning you get less for your money.
- Market overlap hours offer tighter spreads. When London and New York are both open (1 pm - 5 pm GMT), liquidity is highest and spreads are typically narrowest. See our forex market hours table below.
- Avoid converting during major news events like central bank rate decisions or employment data releases. Rates can swing 1-2% in minutes, and spreads widen.
How much should you care about timing? For context, EUR/USD - the world's most traded pair - typically moves 50-80 pips (0.5-0.8%) on a normal day. On a $1,000 transfer that is $5-$8 - noticeable, but far less than the 2-5% many banks charge in markup. In other words: choosing the right service matters more than choosing the right moment.
How to calculate exchange rates
The basic formula is: Amount × Exchange Rate = Converted Amount.
For example, if the USD/EUR rate is 0.92 and you want to convert $1,000 USD:
$1,000 × 0.92 = €920.00
Many services also charge a fixed fee on top of their exchange rate markup. In that case, subtract the fee first:
(Amount − Fee) × Rate = Converted Amount
For example, if a service charges a $25 fee and offers a rate of 0.89 (instead of the mid-market 0.92):
($1,000 − $25) × 0.89 = €867.25
That is €52.75 less than the mid-market result - a total cost of 5.7%. This is why it pays to compare: the fixed fee and the rate markup both eat into your money.
To go the other way (EUR to USD), divide instead of multiply, or use the inverse rate (1 / 0.92 = 1.087):
€1,000 / 0.92 = $1,086.96
For currencies that do not have a direct pair, you can calculate a cross-rate by converting through a common third currency (usually USD). For example, to find the PLN/THB rate: convert PLN to USD, then USD to THB. We do this automatically when needed - see our methodology for how we handle derived rates.
Frequently Asked Questions
What rate am I seeing here?
You're seeing the mid-market rate - the midpoint between what banks buy and sell currencies for. Think of it as the "wholesale" price before any provider adds their cut. We show this so you have a fair benchmark to compare against.
Will I get this exact amount?
Probably not. When you actually convert money, whoever handles the transaction adds their margin. Banks typically mark up 2-5% (varies by country), bureau de change 8-12%, and transfer services like Wise or Revolut usually 0.3-1.5%. Use our rate to see how much you are being charged on top.
Why did the rate change since yesterday?
Exchange rates move with supply and demand and react to news, interest rates, inflation expectations, and market sentiment. Even small shifts in economic data or central bank language can move rates noticeably. Check our pair pages for recent trends: EUR/USD, GBP/USD, USD/JPY.
Why is the ATM offering me a different rate?
The ATM is likely offering Dynamic Currency Conversion (DCC) - converting to your home currency at their rate, which usually includes a hefty markup. If the ATM or card terminal asks whether to charge in your home currency or the local one, always pick the local currency.
Can I use this rate for accounting or taxes?
For official reporting, use the rate your bank applied on the transaction, or the official rate source required by your jurisdiction. Our rates are mid-market references, not transaction records.
How often are rates updated?
Our primary data source updates rates every 60 seconds during market hours. Our fallback source (European Central Bank) updates once per business day. Weekends and bank holidays show the most recent Friday close.
What's the best day of the week to convert?
There's no reliably "best" day - anyone claiming otherwise is guessing. That said, weekday rates tend to have tighter spreads because markets are more active. Avoid converting at weekends or holidays when fewer providers are competing for your business.
Should I use a bureau de change at the airport?
Almost always no. Airport bureau de change counters typically charge 8-12% above the mid-market rate. Better options: use a card with no foreign transaction fees, withdraw from an ATM in the local currency, or convert before you travel using a transfer service. Popular travel pairs: USD to EUR, GBP to EUR, USD to MXN, USD to THB.
How much is $1 US dollar worth in other currencies?
It changes every second, but here are some approximate values to give you a sense of scale. For exact, live rates use the converter above or visit the pair page directly: USD to EUR, USD to GBP, USD to JPY, USD to INR, USD to MXN.
What is the best exchange rate for US dollars?
The "best" rate is the mid-market rate - the true midpoint between buy and sell prices with no markup added. That is the benchmark we show here. In practice, no provider gives you the exact mid-market rate; they all add a margin. The closest you will get is through low-cost transfer services (0.3-1.5% markup). Compare what your provider quotes against our rate to see their real cost. Read more on our methodology page.