How to read an FX quote: rate, spread and total cost

Two providers can both advertise “no fees” and still charge very different amounts. The difference is in the exchange rate.

The mid-market rate

At any moment there is a price at which banks buy a currency and a slightly different price at which they sell it. The midpoint between the two is the mid-market rate. It is the rate you see on financial news sites and search engines, and the fairest reference point.

Businesses are rarely offered the mid-market rate. The question is how far from it your rate is.

The spread

The spread is the difference between the mid-market rate and the rate you are given. It is usually expressed as a percentage.

Example: you need to pay a supplier 100,000 euros.

• At the mid-market rate, this costs 108,000 US dollars.
• Your provider quotes a rate that makes it cost 110,160 US dollars.
• The extra 2,160 dollars is the spread: 2% of the payment.

No fee appeared on the statement, yet the payment cost 2,160 dollars.

Fees still count

Add any fixed fees to the spread to get the total cost. A provider with a small visible fee and a narrow spread is usually cheaper than one with “zero fees” and a wide spread, especially on larger amounts.

How to compare two quotes

Ask each provider one question: if I send this exact amount now, how much will the recipient receive?

Then compare the answers. This single figure includes the rate, the spread and the fees, and it cannot be dressed up.

Timing matters too

Exchange rates move through the day. A quote is only useful if the rate is held long enough for you to act on it. Check whether the rate is locked when you confirm, or whether the conversion happens later at whatever the rate is then.

A checklist for your next payment

• Look up the mid-market rate at the time of the quote.
• Work out the spread as a percentage.
• Add fixed fees.
• Confirm the amount the recipient will receive.
• Confirm the rate is locked at confirmation.