The Only Fair Exchange Rate: The Mid-Market Rate

Exchange rates don't need to be complicated. In fact, there's only one that you ever need to care about: the mid-market rate.

How is the exchange rate set?

How many dollars go into a euro? How many euros go into a yen? How many yen go into a pound?

If you’re thinking ‘The exchange rate decides all that,’ then you’re right. But who decides the exchange rate?

Banks and other providers all set their own rates, so there’s no one answer. But for all intents and purposes, there is a ‘real’ rate out there. It’s called the mid-market rate.

The ‘real’ rate

Generally speaking, bankers are willing to pay a certain price for a currency, and they’re willing to sell it for a certain price. The midpoint of these prices is the mid-market rate.

Since that’s the rate the market naturally sets, it’s the ‘realest’ — and fairest — rate out there. It’s the rate TransferWise gives you when you send money to over 70 countries.

Different organizations use different data sets to calculate the mid-market rate, so it can vary depending on where you look it up. But it shouldn’t vary very much. We pull our rate from Reuters, which updates it in real time while the trading market is open.

To see the current mid-market rate, and how it’s changed over the last 30 days, check out our rate tracker. You can also sign up for rate alerts there; we can send you daily updates on the rate, or let you know when it reaches a certain value.

Here are the traps to look out for when converting your money:

  1. Misleading pricing — You'll see an offer for a '0% fee', 'zero commission' or 'our best rates'*.

  2. A set 'day rate' — Most providers take the mid-market rate, and apply a margin on top, without being transparent. So you have no idea how much they're over charging you by.

  3. An unfair deal on your currency — By hiding the real charge in the exchange rate offered, most providers make huge profits at your expense, and you're none the wiser.

And, of course, any time you see loads of small print.

Beware of markups

Banks and money transfer services use the mid-market rate when they trade between themselves, but they rarely pass it on to you. Instead, they often mark up the rate to make extra money.

So watch out when a service promises a 0% fee, or no commission. They might be hiding those costs in their version of the exchange rate.

But we have nothing to hide.

Think before you send

It can’t hurt to stay up to date on the mid-market rate, and to shop around. Now that you understand how this business works, you know what to look for.

To see how much money you’ll get on the other side with TransferWise, use our fee calculator.

Compare that to the amount you’d get with your bank, and other services. The provider that leaves you with the most money is the one you should go with. Whether or not that’s us.