Where the markup hides
The mid-market rate is the real exchange rate — the midpoint between buy and sell prices that banks use with each other, and the number you see on Google or Reuters. When a bank or transfer service quotes you a worse rate and keeps the difference, that gap is the markup. Because it's built into the rate rather than shown as a fee, it's the most overlooked cost in moving money.
It adds up fast: on a $5,000 transfer, a 3% markup is $150 gone, invisibly — often far more than the advertised “transfer fee.” That's why a “no fee” transfer can still be expensive, and why comparing the total cost matters.
Benchmark against the mid-market rate. Compare how many units the recipient actually gets for your money. A service that gives you the real rate (0% markup) plus one small visible fee almost always beats a “no fee” quote with a marked-up rate.
Typical markups by provider
- Banks: roughly 2%–5% on the rate, on top of a $20–$50 wire fee.
- PayPal: about 3%–4% currency-conversion margin.
- Western Union / MoneyGram: roughly 1%–3% (more on exotic corridors).
- Wise and other mid-market services: 0% markup — the real rate, with a small transparent fee instead.
Frequently Asked Questions
What is an exchange rate markup?
A markup is the gap between the real mid-market exchange rate and the worse rate a bank or service quotes you. It is not shown as a fee — it is baked into the rate — so most people never notice it. A typical markup is 2% to 5% at banks and 3% to 4% at PayPal, while services like Wise use the mid-market rate with no markup.
How do I calculate the exchange rate markup?
Subtract the rate you were offered from the real mid-market rate, then divide by the mid-market rate. For example, if the real rate is 0.92 and you were offered 0.89, the markup is (0.92 − 0.89) ÷ 0.92 = about 3.3%. On a $1,000 transfer that is roughly $33 lost in the rate alone.
What is a typical exchange rate markup?
Banks usually add 2% to 5%, PayPal adds about 3% to 4% on currency conversion, and traditional money-transfer firms like Western Union add roughly 1% to 3% (more on exotic currencies). Specialist services such as Wise give you the real mid-market rate with a 0% markup and a small transparent fee instead.
Is a “no fee” transfer really free?
Usually not. Services advertising “no fees” often make their money on the exchange-rate markup instead, which can cost more than a transparent fee. Always compare the total cost — the upfront fee plus the markup — using the real mid-market rate as your benchmark.
How do I avoid exchange rate markups?
Use a service that gives you the mid-market rate (such as Wise), check the real rate on a neutral converter before you send, fund transfers from a bank rather than a card, and compare how many units the recipient actually receives — not just the advertised fee.