Banks do change currency, but they charge you for it and the rate they offer is usually worse than the market rate

When you deposit foreign currency into your bank account or need to convert money from one currency to another, your bank will handle the exchange. However, banks do not exchange at the real market rate. They add a markup — sometimes called a spread — that can range from 1% to 3% or higher depending on the bank, the currency pair, and whether you are exchanging in person or online. A few banks also charge a flat fee on top of the markup.

The real market rate (called the mid-market rate) is what you see on financial websites and currency converters. Your bank's rate is always worse than that because the markup is how they profit from the transaction. If you are converting a large amount of money, that difference adds up quickly.

Key Takeaways

  • Banks exchange currency at a rate worse than the market rate, adding a markup of 1% to 3% or more to cover their profit and risk.
  • In-person currency exchanges at bank branches often charge higher markups than online transfers or debit card purchases abroad.
  • Your bank may charge both a markup on the exchange rate and a separate flat fee for the transaction.
  • Specialty money transfer services and online banks sometimes offer better rates than traditional banks for large transfers.

Where the markup happens: deposits, transfers, and cash exchanges

If you deposit a foreign check or wire money from another country into your account, your bank converts it at their rate and credits you the converted amount. You do not see the markup as a separate line item — it is built into the amount you receive. A $1,000 USD check deposited into a Canadian account might be converted at the bank's rate rather than the true market rate, so you get less CAD than you would if you converted it yourself elsewhere.

When you send money internationally using your bank's wire transfer service, the same markup applies. The bank quotes you a rate, you approve it, and the money moves at that rate. Some banks also charge a wire fee ($15 to $50) on top of the markup.

If you walk into a branch and exchange cash — say, buying euros with dollars — the markup is usually highest here. Physical cash handling costs the bank money, and in-person exchanges are less competitive than online ones. You might see a 2% to 4% markup on a cash exchange, plus sometimes a flat fee.

How to find out what your bank charges

Call your bank or log into your online account and ask for their current exchange rate on a specific currency pair. Write down the mid-market rate from XE.com, OANDA, or Google Finance at the same moment. The difference between what your bank quotes and the mid-market rate is the markup you are paying.

Ask your bank directly whether they charge a separate fee for the exchange in addition to the markup. Some do, some do not. If you are wiring money internationally, ask whether the fee is charged on the sending end, the receiving end, or both — this matters because it affects how much money actually arrives.

Different banks have different rates for different currencies. A bank might offer a tight markup on euros but a wide one on Thai baht, because euros are traded more frequently and the bank's cost to hedge that currency is lower.

When you use a debit card abroad, the bank still exchanges currency

When you swipe a debit card at an ATM or store in another country, your bank converts the transaction from the local currency to your home currency. The exchange happens automatically, and you see the converted amount on your statement a day or two later. Your bank applies their markup to this transaction too, though you do not see it quoted in advance.

ATM withdrawals often carry both a markup and a flat fee from your bank (usually $2 to $5 per withdrawal), plus sometimes a fee from the ATM operator's bank. A $200 withdrawal abroad can cost you $5 to $10 in fees and markup combined.

Credit cards sometimes offer better exchange rates than debit cards because credit card networks (Visa, Mastercard) negotiate rates with banks differently than ATM networks do. Check your credit card's terms to see what markup they apply, if any.

Alternatives that sometimes offer better rates

Online money transfer services like Wise (formerly TransferWise), OFX, and Remitly often charge lower markups than traditional banks for international transfers, especially for larger amounts. They make their money on volume rather than wide markups, so they can afford to be more competitive. However, they are not banks — they do not hold your account — so you transfer money to them, they convert it, and they send it to the recipient.

Some online banks and fintech banks offer better exchange rates than traditional brick-and-mortar banks. Compare rates before you commit to a transfer, because the difference on a $5,000 transfer can be $50 to $150.

If you travel frequently or do regular business in another country, opening a multi-currency account at your bank (if they offer one) lets you hold money in that currency and avoid repeated exchanges. You exchange once at a better rate, then spend from that balance as needed.

What happens if you disagree with the rate your bank used

Once a transaction has posted, you cannot dispute the exchange rate itself — the rate your bank used was their rate at the time, and that is contractual. However, you can dispute the transaction if it was unauthorized (someone else made the transfer), if the amount is wrong (they converted incorrectly), or if they charged a fee they did not disclose.

If you believe your bank made an error in the conversion calculation, contact them with the transaction details and ask them to review it. Bring the mid-market rate from that date and time if you can find it. Banks rarely reverse a rate dispute, but they will correct a math error.

Before you send money internationally, always ask your bank to confirm the rate and any fees in writing. This protects you if there is a discrepancy later, because you have documentation of what they promised.

Frequently Asked Questions

Can I refuse a currency exchange and ask my bank to hold the money in the original currency?

Some banks allow this if you have a multi-currency account, but most standard checking accounts do not. When money arrives in a foreign currency, the bank converts it automatically. If you want to avoid the conversion, you need to set up a foreign currency account before the money arrives, or use a service like Wise that lets you hold multiple currencies.

Why is the exchange rate different every time I check?

The mid-market rate changes constantly throughout the trading day as currency values shift. Your bank's rate changes too, but usually with a delay. If you check your bank's rate in the morning and again in the afternoon, it may have moved. This is normal and reflects real market movement, not an error.

Do I pay the markup if I transfer money between my own accounts in different currencies?

Yes. Even if both accounts are at the same bank and both in your name, the bank still charges their markup when converting between currencies. Some banks offer slightly better rates for internal transfers, but the markup still applies.

What if my bank's rate is much worse than other banks?

You can switch banks or use a money transfer service for that specific transaction. If you do international transfers regularly, comparing rates across banks and services before each transfer can save you hundreds of dollars per year. There is no penalty for using a different service for a single transfer.

Does the bank charge the markup if I use a credit card to buy something in another country?

Yes. Credit card networks apply an exchange rate and markup when you make a purchase abroad. The markup is usually 1% to 2%, and some credit cards add an additional foreign transaction fee (1% to 3%). Check your card's terms to see what you are charged.